Novartis has assets to sell, investors wary of what it might buy
ZURICH As Novartis considers asset sales that could raise $50 billion, investors are worried any cash raised may give the Swiss drugmaker firepower for another unsuccessful megadeal.
Visa, Mastercard and a group of retailers plan to ask a judge this week to approve a landmark settlement of a lawsuit over credit card fees, setting the stage for a battle with Wal-Mart and hundreds of other merchants who say it is a bad deal.
Announced in July, the $7.2 billion settlement is intended to resolve seven years of antitrust litigation between merchants and credit-card companies and their banks over so-called "swipe fees" that retailers pay to process credit-card transactions.
Merchants alleged the card companies and banks worked together to inflate rates for these interchange fees, costing billions of dollars each year.
If approved, the settlement would apply to the nearly 8 million merchants that take Visa Inc (V.N) and MasterCard Inc's (MA.N) cards.
But in the months since it was filed, a number of major retailers and trade groups have said they would rather have no deal than the one that court-appointed lawyers negotiated on their behalf. On Friday, 10 of the 19 trade groups and stores that led the litigation against the card companies said they would ask U.S. District Judge John Gleeson to reject the settlement.
If approved, the deal would be the largest federal antitrust settlement in U.S. history. In addition to a $6.05 billion payment and $1.2 billion in temporary fee reductions, the deal calls on card companies to allow merchants to charge customers extra for using certain cards. It would also release Visa and Mastercard from a wide range of antitrust claims and new lawsuits over interchange fees.
"This is a remarkably and fatally flawed deal," said Jeff Shinder of law firm Constantine Cannon, who argues that the settlement forces merchants to give up valuable legal rights.
Four of the major trade groups now opposing the deal have replaced their court-appointed counsel with Shinder, a veteran antitrust lawyer who has already represented clients in two other multi-billion dollar antitrust settlements with Visa and Mastercard.
Shinder also represents Wal-Mart Stores Inc (WMT.N), the world's largest retailer, which was not part of the original lawsuit, but would be bound by the settlement if approved.
Retail and restaurant heavyweights such as Target Corp (TGT.N), Starbucks Corp (SBUX.O) and Lowe's Cos Inc (LOW.N), and other national restaurant and retailer groups have also signaled they plan to fight the deal.
That is an unusual show of force against a proposed class-action settlement, legal experts said.
"You don't usually see a lot of objectors in class actions and you don't usually see them of this size and significance," said Jay Tidmarsh, a professor at Notre Dame School of Law.
The settlement also has the support of some big-name retailers, including Kroger Co (KR.N), the largest U.S. grocery chain operator, and its No. 2 rival, Safeway Inc SWY.N.
Among questions the settlement's supporters raise are whether objecting merchants are trying to create a legal stalemate to pressure Congress for credit-card fee legislation.
The "over-the-top criticism" from Shinder and the objectors is "untethered to the law, economics and dynamics of this case," Richard Arnold, who represents individual stores, including Kroger and Safeway, said in a September 18 letter to Shinder filed with the court. His clients include a group of about 20 large stores that have agreed to settle.
Those stores, mostly supermarket and drug store chains, have maintained individual lawsuits alongside the class action. They struck a separate deal for $550 million from the credit card companies and banks, but would still be subject to the non-monetary portions of the class action settlement - including the rule changes and litigation releases.
Representatives for Kroger and Safeway said the settlement would let them communicate with customers directly for the first time about swipe fees. They said consumer awareness of swipe-fee costs could motivate them to switch to less costly payment methods, such as cash.
"We think it will begin to produce real competition in the payments business and potentially lower costs for all consumers," Melissa Plaisance, Safeway's senior vice-president of finance, said of the settlement.
Those who favor the settlement — the individual plaintiffs and a shrinking number of the stores that originally brought the suit - say that without a deal, stores will have to continue to operate in a broken interchange system for years longer.
Attorneys appointed by the court to represent and negotiate on the merchants' behalf are scheduled to formally submit the settlement by October 19 for preliminary approval.
Even without the high-profile objectors, the legal process for approving the proposed settlement was expected to stretch well into 2013. If the objectors succeed in convincing the lawyers, or Gleeson, to reject the deal in its current form, that process could go on even longer.
What merchants such as Wal-Mart say they really want is transparency into how swipe-fee rates are set by banks and credit card companies, and they do not think this deal delivers, said Mallory Duncan, general counsel for the National Retail Federation, which opposes the settlement.
The legal standard for approving class action settlements is that it be "fair, reasonable and adequate."
To Shinder, the deal falls short.
"Because of the scope of the (litigation) release, which by its express terms gives defendants more than they could ever win at trial, this settlement is worse than losing," Shinder said.
He explained that, if merchants lost, they would be back to square one, but at least they could go back to court and try again.
Craig Wildfang, one of the lawyers appointed by the court to represent U.S. merchants affected by the settlement, said merchants got "95 percent of what they wanted" from the settlement and that objectors were asking for relief that only Congress or bank regulators could provide.
The lawyers who favor of the deal, along with Visa and Mastercard and the individual plaintiff stores, say they are confident the settlement will be approved.
While the stores supporting the deal have portrayed Shinder, his clients and other objectors as malcontents trying to drag out the litigation to get Congress' attention, scholars say the legal concerns are legitimate — even though those concerns must be weighed carefully against the court's general reluctance to upset such difficult settlements.
But Gleeson, a well-respected federal district judge, will not have an easy time setting aside the concerns of the nation's largest retailer, particularly when it has joined forces yet again with Shinder and Constantine Cannon. After all, Wal-Mart was the lead plaintiff on behalf of 5 million merchants in a $3.05 billion antitrust settlement with Visa and Mastercard over card-acceptance rules in 2003. Constantine Cannon was its law firm in the litigation and Gleeson was the judge who ultimately approved that deal.
"You have a top judge, you have very fine lawyers for the settlement's proponents, and you're going to have the same thing on the other side," said Howard Langer, a managing partner at Langer Grogan & Diver. "The overwhelming number of settlements are approved, but the overwhelming number of settlements aren't for $7.2 billion and aren't before this kind of judge with this quality of objectors."
(Reporting By Jessica Dye.; Additional reporting by Lisa Baertlein. Editing by Brad Dorfman and Andre Grenon)
CASCAIS, Portugal Confusion surrounding the trade policies of U.S. President Donald Trump's administration means U.S. companies no longer know the rules of the game, a board member and former CEO of toymaker Hasbro told an international conference on Monday.
LONDON/BERLIN British Airways must turn its attention to repairing its brand after a weekend of chaos and criticism caused by a major IT outage that grounded flights from London's two main airports.