Legal

Visa, Mastercard Settle $6.2B Swipe Fee Lawsuit

A $6.2 billion settlement has been reached by Visa, Mastercard and several U.S. banks over a suit brought by merchants over what is commonly known as “swipe fees” — a name for the fees that are paid by those merchants when they accept credit card payments.

The settlement had been anticipated over the past few weeks, as evidenced by news reports over the summer. Those reports speculated about the dollar amount of the settlement — and some possible limits to structural changes in agreements between the card giants and merchants — in the wake of a Supreme Court ruling in June that ruled American Express’ business model and anti-steering provisions were legal.

In addition to Mastercard and Visa, issuers named in the suit include Citigroup, Bank of America and JPMorgan Chase.

As reported this morning (Sept 18) by Reuters and other financial news outlets, the settlement that was announced — which still must be approved by a court — comes on the heels of a settlement that had been worth as much as $7.3 billion in the same case. That earlier, larger settlement was struck down by an appeals court two years ago, and then in 2017, the Supreme Court refused to hear it.

Some Outstanding Issues Remain

If finalized, the $6.2 billion settlement would largely put to rest a case that traces its genesis to 2005 and had been brought by 12 million retailers.

It should be noted, though, that the all-cash agreement — the largest antitrust settlement on the books — had, in fact, been $5.7 billion, because about 8,000 merchants had opted out of the agreement. Among those merchants that opted out were marquee names such as Lowe’s and Starbucks.

Since those merchants had opted out, it is indeed still possible that other suits over the same swipe fee structure could be forthcoming.

Additionally, there is a part of the suit that seeks to revise network rules not covered by Tuesday’s settlement. The Wall Street Journal reported that the Tuesday agreement will have no immediate action tied to this part of the suit amid ongoing negotiations.

The settlement contended that the card companies had violated federal antitrust laws as those merchants had been forced to pay the aforementioned swipe fees and the merchants had been prohibited from steering consumers toward payment alternatives.

Looking at the payout structure, the card companies have paid $5.3 billion to date and now will pay $900 million, thus reaching the $6.2 billion tally. Of that total, Visa’s share, reported Reuters, comes to $4.1 billion (which will come from funds on deposit with the court and from reserve accounts already established). In forthcoming payouts, Mastercard said it is paying $108 million from funds that had been set aside last quarter.

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