Visa, MasterCard settlement revoked

A settlement between Visa, MasterCard and retailers has been rejected by a U.S. Court of Appeals, which called the $7.25 billion agreement "unreasonable and inadequate."

The class action lawsuit had broken plaintiffs into two groups, giving one of the groups inadequate representation.

The National Retail Federation sought to overturn the settlement in 2014, claiming that it failed to reform a system seen as price fixing where Visa and MasterCard set fees for credit cards issued by banks.

"Rather than lower the fees, the card companies proposed in the settlement that they be passed along to consumers as a surcharge. Major retailers rejected the surcharge proposal, saying it was the opposite of what they sought," the NRF noted in an emailed statement.

"This 'settlement' was never a settlement on behalf of the retail industry but rather a backroom deal that failed to represent the interests of retailers," said Mallory Duncan, NRF senior VP and general counsel. "It would have given merchants pennies on the dollar for the price-fixing they have suffered at the hands of the big credit card companies and would have done nothing to end price-fixing or to lower swipe fees going forward. Now it's time to seek real reform of these still-skyrocketing fees whether it be in court or in Congress."

The settlement came in a 2005 lawsuit brought by 19 retailers and trade associations but 10 of the plaintiffs, including all of the associations, rejected the settlement in 2012, according to NRF. The 2014 appeal noted that 19 percent of merchants by card volume had formally objected to the settlement and that 25 percent had opted out.

"The settlement orchestrated by the card networks and banks would have undermined merchants' legal rights," said Deborah White, exec-VP and general counsel for the Retail Industry Leaders Association (RILA). "Today's decision is a victory for all merchants and consumers."

Credit card swipe fees cost retailers roughly $30 billion annually.

Contentious relations continue between merchants and the credit card companies – Walmart recently said it would stop accepting Visa at its stores in Canada – but today those tensions are centered around new EMV chip technology in cards and whether to require PINs or signatures for verification.

For more:
- see this Wall Street Journal story (tiered subscription)
- see this RILA press release

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