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Merchants Seek Preliminary Approval of Historic $7.25 Billion Settlement with Visa, MasterCard and Major U.S. Banks Relating to Interchange Fees and Merchant Point-of-Sale Rules
Oct 19, 2012 (04:10 PM EDT)
NEW YORK, Oct. 19, 2012 /PRNewswire/ -- The merchant plaintiffs in In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, MDL Docket No. 1720 (JG)(JO) have asked a federal court in Brooklyn to preliminarily approve their landmark class action settlement. If preliminarily approved, Court notice of the proposed settlement will be given to merchant class members and a hearing to determine whether to grant Final Approval of the settlement will be scheduled by the Court. If finally approved, the settlement will resolve their long-running antitrust litigation against Visa, MasterCard and their largest member banks (including JPMorgan Chase, Bank of America, Citibank, and Wells Fargo among others) challenging the card networks' interchange fees and merchant card acceptance rules. The proposed settlement was announced on July 13, 2012.
The settlement, the largest ever of a private antitrust case, provides an estimated $7.25 billion to a class of approximately seven million merchants who accepted Visa and MasterCard credit- and debit-cards in the United States since 2004. One fund, in the amount of $6.05 billion, represents compensation for alleged past damages. A second fund, based on the value to merchants of a temporary reduction in interchange fees, is estimated to reach $1.2 billion. In addition, the settlement imposes significant structural reforms to promote price transparency and eliminate certain point-of-sale card acceptance restrictions.
"The meaningful structural reforms that could have been obtained by merchants through further litigation were achieved. These important structural reforms will shift the balance of power from the two dominant payment networks toward card-accepting merchants, ultimately for the benefit of consumers," stated K. Craig Wildfang, co-lead counsel for the merchants and partner at Robins, Kaplan, Miller & Ciresi L.L.P.
Because of this litigation, and by virtue of this settlement, U.S. merchants: (1) will now be able to tell their customers how much the use of a credit card adds to the overall cost of a transaction; (2) will be able to influence payment choices by offering price discounts for use of low-cost cards or other lower-cost payment forms (e.g. cash), or by surcharging use of high-cost cards; (3) merchants operating multiple stores under different trade names will no longer be required to make an "all-or-nothing" decision on whether to accept Visa or MasterCard credit cards; and (4) merchants will now be able to form buying groups to negotiate more favorable commercial terms with the card networks. Moreover, because of this litigation and the threat it posed to the banks which operated both networks as joint ventures, the largest card-issuing banks divested their sole ownership and control of Visa and MasterCard and today independent boards of directors oversee Visa and MasterCard, set interchange rates, and answer to public shareholders.
Laddie Montague, co-lead counsel with Berger & Montague, P.C., noted, "This settlement is a package that allows merchants and their customers to gain transparency of the cost for accepting each type of credit card, gives tools to merchants to lower their costs of acceptance and gives customers options to lower their costs by selecting cheaper forms of payment such as cash or check or a card with a lower fee. This allows both merchants and customers to put pressure on the networks to compete on interchange fees."
In exchange for significant structural reforms and cash compensation, the merchant class will give up the right to continue this litigation, which could take many years to complete, and their right to challenge through private litigation the future effect of those existing rules and conduct challenged in this case or modified by virtue of this settlement. The specific reforms in this settlement last until 2021, but if Visa or MasterCard engage in new unrelated anticompetitive conduct or re-enact their old rules modified by this settlement in the future, merchants may challenge such conduct through private litigation.
Bonny Sweeney, co-lead counsel and partner with Robbins Geller Rudman & Dowd LLP, added, "While this settlement represents a significant step to enabling greater competition in the payment card markets, it does not bar the Department of Justice or states' attorneys general from pursuing additional reforms, nor does it prevent Congress from passing legislation to further reform U.S. payment card systems in a manner that is not available in private litigation."
The co-lead counsel law firms that represent the merchant class are Robins, Kaplan, Miller & Ciresi L.L.P., Berger & Montague, P.C. and Robbins Geller Rudman & Dowd LLP.
More information regarding the settlement, including the Class Settlement Agreement and Appendices, and other information relating to the approval process can be found at: http://www.rkmc.com.
SOURCE Robins, Kaplan, Miller & Ciresi L.L.P.