Visa, Mastercard to pay up to $6.2B in class action over fees
Visa and Mastercard agreed to pay as much as US$6.2 billion to end a long-running pricefixing case brought by merchants over card fees, the largest-ever class action settlement of an antitrust case.
The dispute began in 2005, when Visa and Mastercard were still owned by banks.
Merchants had accused them of violating antitrust laws by illegally inflating swipe fees, or interchange, that merchants pay on every purchase transaction and which banks use to fund consumers’ credit-card rewards. The two payments networks have since gone public — Mastercard in 2006, and Visa in 2008 — and their shares have soared.
Interchange has become costly for retailers who have thin margins, said Mitch Goldstone, president and chief executive officer of ScanMyPhotos.com, one of the suit’s most active plaintiffs. The litigation has “helped fix a broken system and recover billions of dollars for millions of class members.”
This isn’t the first time a settlement has been reached in the case.
In 2013, the parties struck a then-record US$5.7-billion deal that was approved by U.S. District Judge John Gleeson, only to have a federal appeals court reject it three years later, ruling that a provision that barred merchants from suing over fees was unfair.
The settlement amount could be reduced by as much as US$700 million if merchants representing 15 per cent of payments volume decide to opt out of the class, according to Tuesday’s filings.
If merchants representing more than 25 per cent leave, the agreement may be terminated.
“Large merchants who opted out of the first settlement and have been ferociously litigating these issues for years are highly likely to opt out and continue with the litigation,” Jeffrey Shinder, an attorney at Constantine Cannon LLP who represents some merchants in their opt-out cases.
“They did not fight this long to concede to a settlement that is nothing more than a very, very small monetary payment.”