NEW YORK -- Visa Inc. and MasterCard Inc. will pursue a multibillion-dollar antitrust settlement with U.S. merchants over credit-card fees even though opposition to the deal reached a level that would have allowed the card firms to walk away, according to a Bloomberg report.
U.S. retailers accounting for more than 25% of the total volume of credit-card purchases have decided to opt out of the settlement, meeting a threshold that permitted the card firms to back out, MasterCard president and CEO Ajay Banga told investors. The settlement, subject to a judge’s final approval Sept. 12 in federal court in Brooklyn, would end a lawsuit brought on behalf of millions of U.S. businesses that accept credit-card payments.
“The defendants as a group had the right to terminate the settlement agreement because the volume threshold of 25% was exceeded, but elected not to do so,” Banga said during a July 31 conference call with investors.
MasterCard, based in Purchase, New York; Visa, based in Foster City, Calif.; and some of the country’s largest banks are seeking to end an 8-year-long legal battle over allegations that they fixed rates for the interchange fees paid by merchants that accept those credit cards.
Paul Cohen, a spokesman for Visa, the world’s largest payment network company, declined to comment on the settlement, according to Bloomberg.
Dozens of major retailers, including the world’s largest, Wal-Mart Stores Inc., and dozens of convenience store retailers, have alleged the credit-card fee deal is unfair and called for other merchants to reject it. Almost 8,000 businesses have opted out of the settlement and some have filed their own lawsuits against the card companies and banks.
In November, U.S. District Judge John Gleeson in Brooklyn tentatively approved the settlement, saying that while there were issues that would require “significant scrutiny,” they weren’t serious enough to derail a preliminary sign-off.
A representative of NACS, which strongly encouraged convenience store retailers to opt out of the deal, was not surprised that the settlement will continue.
"The only news here is that the 25% threshold was hit," Lyle Beckwith, senior vice president of government relations, told CSP Daily News. "The proposed settlement is such a sweetheart deal for the credit cards and banks, they would have to be idiots to reject it. If it were even close to being a fair settlement, I suspect they would have walked."
The settlement, unless overturned on appeal, will force regulators to revisit rules that bankers said would cost them 45% of their swipe-fee revenue.
Visa and MasterCard, which were formerly owned by banks and spun off through initial public offerings, collect interchange fees from merchants that are ultimately turned over to banks, according to their financial filings with the U.S. Securities and Exchange Commission.
In the credit-card fee case, the size of the estimated $7.25 billion settlement will be reduced by about $1.5 billion in light of the merchants that chose to opt out of the deal, lawyers representing the class of all U.S. retailers said in a court filing Aug. 16. The lawyers said they will also reduce fees they are seeking to about $570 million from about $720 million.
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