Interchange Case’s Next Stop: Supreme Court? (June 3, 2014)
There may be one more round to go in the dispute between merchants and the Federal Reserve over interchange fees and debit routing requirements. A consortium of merchant groups, including the National Association of Convenience Stores (NACS) and the National Retail Federation (NRF) has filed an application seeking 30 more days to decide whether to request a Supreme Court review of the case, (NACS v. Board of Governors of the Federal Reserve System). The original deadline to request a Supreme Court hearing was June 19, but the plaintiffs were granted an extension until July 21.
The plaintiffs in the long-running case faced a major blow in March, when the U.S. Court of Appeals for the District of Columbia reversed a lower court’s ruling that the Fed had set too high a limit on debit card interchange fees in 2011, when the agency set rules implementing interchange caps as called for by the Durbin Amendment. The Fed’s cap worked out to around 21 cents per transaction, plus five basis points for transaction and fraud monitoring provisions. In November 2011, merchants, including NACS and the NRF, sued the Fed, claiming the limit should be closer to 12 cents per transaction.
In July 2013, U.S. District Court Judge Richard Leon ruled in favor of the merchants. Soon after Leon’s verdict, the Fed announced its intention to file an appeal, kicking the case to the appellate court, where a three-judge panel heard arguments in January and ruled in favor of the Fed two months later. The appeals court also threw out a network-routing requirement to have two unaffiliated routing options for each authorization method available on a debit or prepaid card. The requirement would have been highly disruptive, according to many observers, forcing card issuers to offer up to four different routing options for each card; two each for signature and PIN transactions.
The merchant plaintiffs missed a May 5 deadline to request a rehearing of the appellate court’s decision, leaving a Supreme Court review the only option left on the table. But it remains unclear whether the high court will grant a review request if one is filed, says Terry Maher, a partner at Baird Holm LLP. “Every indication is that the merchants will seek to appeal the case to the U.S. Supreme Court [but] it is not clear if the Supreme Court will take up the appeal,” Maher tells Paybefore. “Each year, the court receives over 9,000 petitions for certiorari [review] and they only agree to accept 80 to 100 of these petitions.” Four Supreme Court justices have to agree that the issues in the case merit granting the petition for review, he notes. “If the petition is granted, the case will be briefed and oral arguments will be held during the next court term starting in the fall.”
If the court refuses to grant the petition, Maher says the Court of Appeals decision will stand and the case will be remanded to the trial court to address the one issue left open in the appeals court decision—clarification of the transaction monitoring cost element of the fee cap.
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