On Tuesday, September 18, Visa, Mastercard, and a number of US banks agreed to pay US$6.2 billion to settle a long-running antitrust suit brought by merchants over the fees they pay when they accept card payments, reported Reuters.
Visa and Mastercard previously reached a US$7.25 billion settlement with the merchants in the case, but that deal was thrown out by a federal appeals court in 2016 and the US Supreme Court last year refused to revive it.
“After years of thoughtful negotiation, we are pleased to be able to reach this agreement and move forward in our partnership with merchants to provide consumers convenient, reliable, secure ways to pay,” Kelly Mahon Tullier, Visa’s general counsel, said in a statement.
As part of the payment, Visa and Mastercard will use shares owned by banks including JPMorgan Chase, Citigroup, and Bank of America. The lawsuit is one of many flashpoints in the battle between retailers and financial firms over the US$90 billion that US merchants spend every year on swipe fees, reported Bloomberg..
Some Outstanding Issues Remain
If finalized, the US$6.2 billion settlement would largely put to rest a case that traces its genesis to 2005 and had been brought by 12 million retailers.
It should be noted, though, that the all-cash agreement — the largest antitrust settlement on the books — had, in fact, been US$5.7 billion, because about 8,000 merchants had opted out of the agreement. Among those merchants that opted out were marquee names such as Lowe’s and Starbucks.
Since those merchants had opted out, it is indeed still possible that other suits over the same swipe fee structure could be forthcoming.
Additionally, there is a part of the suit that seeks to revise network rules not covered by Tuesday’s settlement. The Wall Street Journal reported that the Tuesday agreement will have no immediate action tied to this part of the suit amid ongoing negotiations.
The settlement contended that the card companies had violated federal antitrust laws as those merchants had been forced to pay the aforementioned swipe fees and the merchants had been prohibited from steering consumers toward payment alternatives.
Looking at the payout structure, the card companies have paid US$5.3 billion to date and now will pay US$900 million, thus reaching the US$6.2 billion tally. Of that total, Visa’s share, reported Reuters, comes to US$4.1 billion (which will come from funds on deposit with the court and from reserve accounts already established). In forthcoming payouts, Mastercard announced said it is paying US$108 million from funds that had been set aside last quarter.