Update: The court has held that the plaintiffs must formally seek approval of the proposed settlement by October 19, 2012.
In In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, the defendants have agreed to a $7.25 billion settlement of multidistrict litigation in the Eastern District of New York.
Plaintiff merchants filed the 2005 case alleging that the Visa and MasterCard associations and large banks conspired to increase the fees paid by merchants to accept credit cards. If the court approves the settlement, a class of approximately seven million card-accepting merchants will receive $6.05 billion for past damages and an eight-month fee reduction anticipated to total approximately $1.2 billion. Visa and MasterCard also agreed to settle with merchant plaintiffs that had filed separately for $525 million. Interestingly, Visa will bear the larger share of the two settlements, $4.4 billion to MasterCard’s $790 million.
In addition to the monetary payments, Visa and MasterCard will modify their network rules to (1) allow retailers to surcharge credit card transactions; and (2) form merchant buying groups to negotiate interchange rates collectively.
As a class action settlement, court approval is required. Approval is not assured, given that at least three significant class members and a retailers group have opposed the settlement. The National Association of Convenience Stores, a plaintiff, and The National Retail Federation, which is not a party, immediately announced their opposition to the settlement on the ground that it does not do enough to create competition in the setting of merchant credit card fees. Within a short time, major retailers Target and Wal-Mart also opposed the settlement. Target stressed that it failed to provide a long-term solution for what a spokesman described as a “broken system,” stressing that it had no interest in surcharging its customers and did not want to give up the option to sue in the future if rates remained unreasonably high. Issuing a statement a day after Target, a Wal-Mart spokesman echoed its competitor’s objections to the settlement, claiming that it “would not structurally change the broken market or prohibit credit card networks from continually increasing hidden swipe fees” and “would require merchants to broadly waive their rights to take action against the credit card networks for detrimental conduct or acts.”
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