Visa and MasterCard have agreed to pay $7.25 billion to U.S. retailers in a lawsuit that alleges the card processing giants manipulated credit and debit card fees.
The settlement, if given the green light by a federal judge, would resolve what could be the largest antitrust settlement in American history. Card processors and financial institutions would also be permitted to charge customers extra to use certain credit cards in an effort to steer them towards cheaper payment methods, according to the Chicago Tribune.
The proposed settlement would involve a payment of $6 billion from Visa, MasterCard and issuing banks to a class of retailers. Visa and MasterCard have also agreed to reduce interchange fees for eight months, a consideration valued at $1.2 billion. Additionally, $525 million will be paid to stores in individual lawsuits.
“This is a historic settlement,” Bonny Sweeney, the plaintiffs’ lawyer, said, the Chicago Tribune reports. “In addition to refunding billions of dollars to retailers that paid artificially inflated interchange fees, the reforms will create real price competition, leading to reduced card-acceptance fees for retailers.”
Some plaintiffs, however, were unsatisfied with the settlement. The National Association of Convenience stores expressed disappointment with the settlement in a statement by president Tom Robinson.
“Not only does the proposed settlement fail to introduce competition and transparency, it actually provides Visa and MasterCard with the tools to continue to shield swipe fees from market forces,” Robinson said, according to the Chicago Tribune.
Visa and MasterCard have dealt with legal issues arising over their card policies for the past 10 years. In 2003, the processing giants paid a combined $3 billion to settle a suit arising from their “honor all cards” policies. The U.S. Department of Justice then filed a civil antitrust suit against the companies. Both firms agreed to eliminate certain policies that prohibited retailers from steering customers to certain forms of payment.
Visa announced in December that it had set aside $1.57 billion to cover a possible settlement in the lawsuit. MasterCard reported a $770 million pretax charge to cover its possible liabilities in the suit, according to the Chicago Tribune.