MasterCard and Visa Reach Settlement in Antitrust Suit
A settlement was announced last week in a 2005 lawsuit that charged MasterCard, Visa, and major banks with engaging in price-fixing to charge high fees for credit card payment processing. The case, which was brought in federal court on behalf of approximately seven million merchants, also charged the payment processors with unfairly banning stores from requiring customers to use other less-expensive methods of payments.
Among the key points in the proposed settlement, which still must be approved by the court:
Merchants (including ABA member bookstores) that accepted Visa and MasterCard credit card payments any time from January 1, 2004, up to eight months prior to final approval of the settlement will be entitled to a payout from the more than $6 billion settlement. A formula for allocation of the settlement amount is still being worked out; a notice to merchants, including information about the allocation plan, is expected to go out in late 2012 or early 2013.
MasterCard and Visa will reduce the charge to process credit card transactions by 10 basis points for eight months. (The New York Times reported that the fee reprieve is estimated by the plaintiffs to be worth $1.2 billion.)
Merchants will be able to surcharge credit card purchases where state laws allow; 10 states, including New York, California, and Texas, have laws prohibiting surcharges. There will also be a number of specific requirements that merchants will have to follow relating to the amount and application of the surcharge.
- Merchants will have the right to organize buying groups for the purpose of negotiating with Visa and MasterCard. To allow this, Visa and MasterCard will have to modify their existing rules and regulations.
Court approval of the settlement is not expected until the end of the year or later.
Opposition to the settlement has already been voiced by the National Association of Convenience Stores, which has hired a law firm to challenge the settlement on the grounds that it doesn’t address the central issue of how much control Visa, MasterCard, and the banks have over the merchants that accept their cards for purchases, the Wall Street Journal reported.
Watch for continuing coverage in upcoming editions of BTW.