July 13, 2012
Visa Inc. (V), MasterCard Inc. (MA) and some of the biggest U.S. banks agreed to a settlement of at least $6.05 billion with retailers in a price-fixing case over interchange fees, according to a filing in federal court in Brooklyn, New York.
The total value of the settlement is $7.25 billion on behalf of a class of about 7 million merchants in the U.S. that accept Visa and MasterCard credit cards and debit cards, a law firm for the merchants, Robins, Kaplan, Miller & Ciresi LLP, said in a statement.
The agreement follows a seven-year legal battle with U.S. retailers that accused the two largest payment networks of conspiring with banks to fix swipe fees, or interchange.
The dispute began in 2005, a year before MasterCard’s initial public offering and three years ahead of San Francisco- based Visa’s. Merchants alleged the companies violated antitrust law by fixing the swipe fees, which average about 2 percent of the purchase price. Proceeds generate more than $40 billion a year for U.S. banks.
The case had been set for trial in September before U.S. District Judge John Gleeson in Brooklyn.
Earlier Settlement
The agreement follows a 2010 settlement with the Justice Department in which the two payment networks agreed to allow 4 million merchants only accepting their branded cards to steer customers to different credit cards or other forms of payments by offering incentives. New York-based American Express Co. is still fighting the government lawsuit.
American Express, the third-biggest U.S. network and No. 4 Discover Financial Services, based in Riverwoods, Illinois, aren’t defendants in the merchants’ lawsuit.
Visa and the banks that issued its cards would be responsible for two-thirds of the settlement in the merchants’ suit, while MasterCard and its card-issuing banks will pay the rest, the companies said in February 2011 regulatory filings.
Visa, the biggest bank-card network, had $4.28 billion in uncommitted funds set aside to cover litigation at the end of March. No. 2 MasterCard took a $495 million charge in the fourth quarter for its portion of a potential settlement, according to a statement.
Defendants
Defendants in the case include Bank of America Corp., Citigroup Inc. (C), Wells Fargo & Co. (WFC), Capital One Financial Corp. (COF), Barclays Plc (BARC) and HSBC Holdings Plc. (HSBA)
Before their IPOs, Visa and MasterCard were controlled by consortiums of the largest banks. After regulatory actions around the globe targeted the fees, the banks took the payment networks public in hopes of evading antitrust liability, the merchants alleged in court filings.
The case is In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, 05-md-01720, U.S. District Court, Eastern District of New York (Brooklyn).
To contact the reporter on this story: Christie Smythe in federal court in Brooklyn, New York, at [email protected]. Dakin Campbell in San Francisco at [email protected]
To contact the editor responsible for this story: Michael Hytha at [email protected]; David Scheer at [email protected]
Visa Inc. (V), MasterCard Inc. (MA) and some of the biggest U.S. banks agreed to a settlement of at least $6.05 billion with retailers in a price-fixing case over interchange fees, according to a filing in federal court in Brooklyn, New York.
The total value of the settlement is $7.25 billion on behalf of a class of about 7 million merchants in the U.S. that accept Visa and MasterCard credit cards and debit cards, a law firm for the merchants, Robins, Kaplan, Miller & Ciresi LLP, said in a statement.
The agreement follows a seven-year legal battle with U.S. retailers that accused the two largest payment networks of conspiring with banks to fix swipe fees, or interchange.
The dispute began in 2005, a year before MasterCard’s initial public offering and three years ahead of San Francisco- based Visa’s. Merchants alleged the companies violated antitrust law by fixing the swipe fees, which average about 2 percent of the purchase price. Proceeds generate more than $40 billion a year for U.S. banks.
The case had been set for trial in September before U.S. District Judge John Gleeson in Brooklyn.
Earlier Settlement
The agreement follows a 2010 settlement with the Justice Department in which the two payment networks agreed to allow 4 million merchants only accepting their branded cards to steer customers to different credit cards or other forms of payments by offering incentives. New York-based American Express Co. is still fighting the government lawsuit.
American Express, the third-biggest U.S. network and No. 4 Discover Financial Services, based in Riverwoods, Illinois, aren’t defendants in the merchants’ lawsuit.
Visa and the banks that issued its cards would be responsible for two-thirds of the settlement in the merchants’ suit, while MasterCard and its card-issuing banks will pay the rest, the companies said in February 2011 regulatory filings.
Visa, the biggest bank-card network, had $4.28 billion in uncommitted funds set aside to cover litigation at the end of March. No. 2 MasterCard took a $495 million charge in the fourth quarter for its portion of a potential settlement, according to a statement.
Defendants
Defendants in the case include Bank of America Corp., Citigroup Inc. (C), Wells Fargo & Co. (WFC), Capital One Financial Corp. (COF), Barclays Plc (BARC) and HSBC Holdings Plc. (HSBA)
Before their IPOs, Visa and MasterCard were controlled by consortiums of the largest banks. After regulatory actions around the globe targeted the fees, the banks took the payment networks public in hopes of evading antitrust liability, the merchants alleged in court filings.
The case is In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, 05-md-01720, U.S. District Court, Eastern District of New York (Brooklyn).
To contact the reporter on this story: Christie Smythe in federal court in Brooklyn, New York, at [email protected]. Dakin Campbell in San Francisco at [email protected]
To contact the editor responsible for this story: Michael Hytha at [email protected]; David Scheer at [email protected]
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