Visa, MasterCard and nine major issuing banks have settled
a seven-year-long lawsuit, agreeing to pay retailers at least $6bn,
in a law suit that alleged the payments industry conspired to fix
interchange fees.
The class action, filed by a number of US
merchants including Kroger, Safeway and Rite Aid, accused the
networks and issuers of price-fixing, arguing that the banks
originally spun off MasterCard and Visa through initial public
offerings in 2005 and 2006 largely to avoid the appearance of a
monopoly.
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As well as the cash component, the settlement
also requires the schemes to reform aspects of their business
practices, and negotiate with merchant buying groups.
“These new rules will give merchants the tools
they need to put pressure on the credit card networks to lower
interchange or swipe fees, which are the second-or third-highest
cost of doing business for many retailers,” said Patrick J.
Coughlin, senior trial counsel at Robbins Geller Rudman & Dowd
LLP, and one of the lawyers for the plaintiffs.
In a statement on Friday, MasterCard confirmed that members of
the class action will receive a 10 basis points reduction in credit
interchange rates for eight months, the cost of which will be
passed on to issuers. The settlement also requires that MasterCard
negotiates in good faith with “any lawful merchant buying group in
an effort to reach a commercially reasonable agreement”.
Noah Hanft, MasterCard’s general counsel and chief franchise
integrity officer said: “Our decision to settle is based on our
belief that MasterCard and our stakeholders are best served by an
amicable resolution.
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By GlobalData“Although we have strong defences to all claims, a settlement
avoids years of litigation and the uncertainties that are inherent
in such cases. We believe that today’s settlements should resolve
all issues with the merchant community.”
