Court upholds $5.6 billion settlement in Visa and MasterCard antitrust lawsuit.
A federal court this week upheld a $5.6 billion antitrust class-action settlement with more than 12 million retailers that accused Visa Inc and MasterCard Inc of improperly fixing credit and debit card fees.
The 2nd U.S. Circuit Court of Appeals in Manhattan rejected claims that a class action should not have been certified because of confusion over who deserved compensation and the $523 million of legal fees awarded to the retailers' lawyers was too high.
In 2019, Visa and MasterCard agreed to pay $5.6 billion to settle a long-running lawsuit with retailers over card-swipe fees. The settlement resolved a 13-year legal battle that began in 2005 when retailers accused Visa, MasterCard, and several banks of conspiring to fix the fees charged to merchants when customers used credit or debit cards. The lawsuit was filed by retailers, including Walmart, Target, and Home Depot, who alleged that the card networks and banks had violated antitrust laws by working together to set and maintain high fees.
The settlement was initially approved by a federal judge in 2019 but faced an appeal by a group of retailers who argued that the settlement was inadequate. However, in January 2021, the U.S. Court of Appeals for the Second Circuit upheld the settlement, allowing it to move forward.
Under the terms of the settlement, Visa and MasterCard agreed to pay $5.54 billion to the retailers. In comparison, several banks also named in the lawsuit agreed to pay an additional $900 million. The settlement also included a provision that would allow retailers to impose surcharges on credit card transactions, which was previously prohibited in many states.
The settlement put an end to the allegations made by retailers that Visa and MasterCard had been overcharging them on interchange fees, also known as swipe fees, whenever customers used credit or debit cards. Moreover, the settlement removed the prohibition on retailers from directing customers to opt for cheaper payment methods.
The settlement is considered to be one of the largest antitrust settlements in U.S. history and is expected to have a significant impact on the retail industry.
Retailers' lawyers had billed for 630,000 hours of work, or about 72 calendar years, and could collect more if Visa and MasterCard's anticompetitive behavior resumed and more litigation ensued.
The case is In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, 2nd U.S. Circuit Court of Appeals, No. 20-339.