Court does away with antitrust settlement between Visa, MasterCard and retailers

The Second US Circuit Court of Appeals in New York said the accord was unfair to retailers that stood to receive no payments and, in the courts view, little or no benefit at all, reuters.com reports. It also decertified the case as a class action. The deal had been the largest all-cash US antitrust settlement, though its value shrank to about USD 5.7 billion after roughly 8.000 retailers opted out.

The decision is a body-blow to the credit card industry, which hoped the settlement would end a decade of litigation brought on behalf of about 12 million retailers against Visa, MasterCard and banks that issue their cards. It was intended to resolve claims that merchants were overcharged on interchange fees, or swipe fees, when shoppers used credit or debit cards, and were barred from directing customers toward cheaper means of payment.

The settlement may now need to be renegotiated, or the case could go to trial. Swipe fees are an improper and unnecessary hidden tax on consumers, said Jeffrey Shinder, a Constantine Cannon partner representing Amazon, Costco Wholesale, Wal-Mart and other opponents of the accord.

The National Retail Federation said retailers pay roughly USD 60 billion annually in swipe fees, which typically average around 2%. Card-issuing banks would have funded much of the settlement. JPMorgan and Bank of America had estimated they were responsible for roughly one-fifth and one-tenth, respectively, of a payout.

The settlement had called for retailers that accepted Visa or MasterCard from January 2004 to November 2012 to share in as much as USD 7.25 billion, with the ability to opt out. Retailers that accepted the cards from then on, meanwhile, were to get injunctive relief in the form of rule changes, expiring in July 2021, and could not opt out.

Visa shares closed down USD 2.57, or 3.3%, at USD 74.17. MasterCard fell USD 4.07, or 4.4%, to USD 88.06. The S&P 500 Information Technology Index .SPLRCT, which includes both, rose 1.1%.