Visa, Mastercard Near Settlement Over Card-Swipe Fees
June 28 2018 - 9:16AM
Dow Jones News
By AnnaMaria Andriotis
Visa Inc. and Mastercard Inc. are close to settling a
long-running antitrust lawsuit with merchants over the fees they
pay when they accept card payments, according to people familiar
with the matter.
Under the settlement, Visa, Mastercard and a number of banks
that issue debit and credit cards including JPMorgan Chase &
Co., Citigroup Inc. and Bank of America Corp. would pay the
merchants around $6.5 billion, some of the people said. It is not
clear how the payment would be split up among the card networks and
the issuing banks.
The parties on Tuesday informed the U.S. District Court for the
Eastern District of New York that they reached a settlement, the
people said. They intend to draw up a draft of the deal by mid-July
and to submit a final agreement to the court by mid-August, the
people added.
The case has been a highly contentious one for merchants and has
raised questions about the longevity of the credit card fee model.
At issue are the card swipe or interchange fees that card networks
set and that merchants pay to banks when consumers use their cards
to shop. Merchants allege that the networks and banks have colluded
to inflate those fees.
Merchants first brought the class-action suit in 2005 against
Visa, Mastercard and the largest U.S. card-issuing banks. But many
large merchants opted out of the original settlement of $7.25
billion that was reached in 2012 largely due to terms that would
have barred them from filing lawsuits against the networks over
future swipe-fee increases. An appeals court invalidated that
settlement on the grounds that merchants weren't adequately
represented. The Supreme Court last year declined to hear the case,
shifting it back to the district court.
Around $5 billion of the original settlement amount remained in
escrow, according to people familiar with the matter, and would be
distributed as part of the new settlement if it is approved by the
court.
Merchants that agree to the settlement will be restricted for a
number of years from suing the card networks over the same
card-swipe-fee claims the suit addressed, according to people
familiar with the matter. Merchants who disagree with the terms of
the settlement will be able to opt out and proceed with their own
lawsuits against the networks, the people said.
Several large merchants, including Home Depot Inc. and
Amazon.com Inc., have filed separate lawsuits over the fees. Among
the terms that the merchants are challenging are the card networks'
"honor all cards" requirement. That rule prohibits merchants from
selecting between a network's cards; instead merchants that accept
one Visa credit card, for example, must accept all Visa credit
cards. Swipe fees vary significantly between the networks' cards
and are higher on cards with generous rewards programs.
Merchants were dealt a big loss this week when the Supreme Court
backed American Express Co.'s policy of preventing merchants that
accept AmEx cards from offering shoppers discounts or other
incentives to use cheaper cards. The court's decision is a setback
for the merchants' broader ambitions to take on credit card swipe
fees.
Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com
(END) Dow Jones Newswires
June 28, 2018 10:01 ET (14:01 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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