Payment card interchange fee and merchant discount antitrust litigation
The payment card interchange fee and merchant discount antitrust litigation is a United States
In December 2023, claim forms began mailing to millions of business owners in the class who accepted Visa and/or Mastercard payment cards during the 15-year class period from Jan. 1, 2004 to Jan. 25, 2019.[3] The claims period closes May 31, 2024.
Ongoing Legal Developments
In March 2024, an important agreement was reached by Visa and Mastercard to reduce what are known as "swipe fees" for merchants in the United States. This change, set to last five years, is expected to save retailers about $30 billion. It marks the end of a long-standing legal battle over antitrust issues involving these two major credit card issuers.[4] As part of the settlement, the companies agreed to lower their processing fees at all US merchants by at least four basis points for the next three years, ensuring these reduced rates stick for a total of five years.
Moreover, the deal includes a provision that the reduced fees must be at least seven basis points lower than the current average. An independent auditor will review this aspect to confirm compliance.[5]
The agreement now awaits the green light from the U.S. District Court for the Eastern District of New York, which, if approved, will be a significant step towards addressing anti-competitive practices in the credit card processing industry.[6]
Claims
Plaintiffs allege that Visa, Mastercard, and other major credit card issuers engaged in a conspiracy to fix
Settlement
On 27 November 2012, United States District Judge John Gleeson entered an order granting preliminary approval to a proposed settlement. Speaking of the settlement Gleeson said, “I don’t mean to suggest for a moment that there are not a number of issues that are going to require significant scrutiny. I’m not persuaded that the deficiencies are the obvious deficiencies that ought to derail preliminary approval.” Gleeson's approval was important because it allows the potential seven million or more members of the class to begin the process of opting in or out of the settlement.[7]
Terms
The settlement provides for the cash equivalent of a 10 basis-point reduction (0.1 percent) of swipe fees charged to merchants for a period of eight months. This eight-month period would probably begin in the middle of 2013. The total value of the settlement will be about $7.25 billion.[7][8] This amount could be decreased based on the number of plaintiffs who opt-out.[9]
A part of the settlement that allows merchants to charge fees to customers paying via credit card in order to recoup swipe fees took effect on 27 January 2013. Debit cards and transactions in the ten states that prohibit credit-card surcharges will not be affected. Many large retailers, such as Wal-Mart and Target have opted not to impose surcharges.[10] In the event of a return, surcharges are refunded along with the purchase price of the merchandise.[11] The National Association of Convenience Stores, also known as the NACS, complained that this measure "merely make[s] retailers the collection agents for the banks."[12] The National Retail Federation said, "that card company fees are the problem and the surcharge story is a volume that belongs on the fiction aisles. The real threat to retailers and their customers continues to be price-fixed hidden fees that can only be cured by transparency and competition."[13]
Opponents object to provisions that would bar future lawsuits and even prevent merchants from opting out of significant portions of the proposed settlement. Stephen Neuwirth, a lawyer representing Home Depot, said, “It’s so obvious Visa and MasterCard were prepared to make a large payment because of the scope of the releases being given. It’s all one quid pro quo and merchants like the Home Depot are being denied the chance to opt out of that quid pro quo and say this is a bad deal.” [7]
Opposition
According to court filings,
Class members can opt out of the monetary part of the settlement in addition to objecting in court. Visa, MasterCard, and issuing banks can scuttle the settlement if merchants that account for 25 percent or more of credit card spending in the United States since 1 January 2004 to the approval of the settlement.[9]
The NACS is strongly encouraging its members to opt out. Hank Armour, president and CEO of NACS said, "It is important to note that if you do nothing, it will be presumed by the court that you accept the terms of the proposed settlement. Even if you submitted a declaration objecting to the proposed settlement last fall, you must respond to the notice and submit something in writing again if you want to opt-out of or object to the proposed settlement." The NACS has created a website dedicated to encouraging merchants to opt out that provides detailed instructions on how to do so.[14]
The
Prior to this settlement, merchants won a major victory against payment processors and card issuers with the passage of the
Appeal
Immediately after the preliminary approval of the settlement by Judge Gleeson in November 2012 a group of plaintiffs appealed to have it invalidated. The plaintiffs argued that the settlement violated their rights by not allowing them to opt out of some provisions. The inability to opt out of litigation releases that bar future suits was an important point of contention. Jeff Shinder, a lawyer for the plaintiffs said, "The proposed settlement violates the due process rights of millions of merchants by denying them the ability to opt out of the injunction, and this fundamental issue of law should be addressed now before notice goes out to merchants."[17]
In January 2013, the United States Court of Appeals for the Second Circuit ruled that any appeals against the settlement that received preliminary approval in November 2012 would not be heard until objections to the settlement are filed and considered by the trial court in September 2013. The practical effect of this ruling was to allow settlement notices to be sent to eligible merchants.[14]
In June 2016, the United States Court of Appeals for the Second Circuit overturned the settlement on the ground that class counsel could not adequately represent merchants who has a significant interest in the monetary relief provided by the settlement and merchants who could only benefit from the prospective injunctive relief.[18]
Legal fees
In April 2013, the three law firms appointed to lead the plaintiffs in this case asked for $720 million in fees. If approved this would be one of the largest awards of legal fees in American history. They argued that such high fees were reasonable given the amount of the settlement and the risks and complexity of the case. This dollar amount represents about 4.5 times what would normally be billed at an hourly rate for the work performed. Approval of these fees partially depends upon approval of the settlement. The law firms in question are
Independent expert
In December 2013, U.S. District Court Judge John Gleeson approved a settlement in the case that amounted to $7.25 billion.[20] The settlement lowers interchange fees for merchants and also protects credit card companies from being sued over the issue again in the future.[21] That settlement was reversed. Currently one for US$6.24 billion is scheduled to go before the district court on November 7, 2019.[22]
Judge Gleeson retained Alan Sykes as an independent expert in order to help the judge evaluate the proposed settlement. Gleeson said he appointed Sykes would "advise the court with respect to any economic issue that may arise in connection" with final approval of the settlement. Gleeson mentioned appointing an independent expert during the hearing on preliminary approval in November 2012. He informed the parties in March 2013 that he was considering Sykes, a professor at New York University's law school. According to a resume published by the court, Sykes previously taught at Stanford and the University of Chicago and has published several books and scholarly articles on economics and trade. No party objected to the appointment of Sykes. While parties routinely make use of experts to support their positions, judges rarely exercise this option.[23]
Parties and counsel
In addition to Visa and MasterCard most of the largest credit card-issuing American banks such as
Co-lead class counsel include Laddie Montague, Merrill Davidoff, and Michael Kane of
Counsel for Visa include Robert Vizas, Robert Mason, Mark Merley, and Matthew Eisenstein of
Case name and venue
This case is formally known as In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation. The docket number is 05-md-01720. The United States District Court in the Eastern District of New York in Brooklyn is the venue.[7]
The case is more commonly known as Swipeopoly,[24] in reference to the alleged Visa and Mastercard duopoly over the payments network. Other variations include the Swipeopoly [25] Settlement and the Swipe Fee Scandal.
See also
References
- ^ "Court Announces $5.54-6.24 Billion Settlement Providing Payments to Merchants who Accepted Visa or Mastercard since 2004". U.S. District Court for the Eastern District of New York. PRNewswire. February 22, 2019.
- ^ "Dkt No. 503_Second Circuit Opinion.pdf" (PDF). Payment Card Settlement. U.S. Court of Appeals for the Second Circuit.
- ^ "Millions of U.S. Businesses Eligible for a Share of $5.54B Payment Card Settlement". Robbins Geller Rudman & Dowd LLP. PRNewswire. 1 December 2023.
- ^ "U.S. Merchants Enter Into Landmark Class Action Settlement with Visa and Mastercard to Eliminate Anti-Competitive Restraints and Reduce Swipe Fees". Retrieved 2024-03-26.
- ^ "Credit Card Processing Fees Explained". Retrieved 2024-03-07.
- ^ "What We Know About Visa and Mastercard's Landmark $30 Billion Swipe Fee Settlement". Forbes. Retrieved 2024-03-26.
- ^ a b c d e f g "Visa Mastercard fee deal falls too short retailers claim". Business Week. November 9, 2012. Archived from the original on November 12, 2012.
- ^ a b c d "Visa Mastercard 7.3 billion settlement over credit card fees". NBC News. July 14, 2012.
- ^ a b c "Durbin Calls $6.6 Billion Visa Swipe-Fee Accord Bad Deal". Bloomberg.com. 7 August 2012.
- ^ "New Credit Card Swipe Fee Rules Are Good News for Shoppers". Forbes.
- ^ "Retailers May Begin Charging Swipe Fees on Credit Card Purchases".
- ^ "'Call to Arms' Follows Swipe-Fee Settlement Appeal Delay". CSP.net. 2013-01-31. Archived from the original on 2013-06-28.
- ^ Duncan, Mallory B. (March 2013). "Surcharge 'Propaganda' Distracts Real Swipe Fee Problem". Archived from the original on 2013-03-08.
- ^ a b "Swipe Fee Settlement Appeal Delayed Until This Fall - Business Focus - Convenience Store News". Archived from the original on 2013-02-23. Retrieved 2013-03-12.
- ^ "Retail group opts out of Visa, MasterCard pact".
- ^ Silver-Greenberg, Jessica (13 July 2012). "MasterCard and Visa Will Pay Billions to Settle Antitrust Suit". The New York Times.
- ^ Dye, Jessica (2012-11-27). "Merchants appeal $7.2 billion card-fee settlement". CNBC. Archived from the original on 2013-04-10.
- ^ "Visa, MasterCard Merchant Settlement Overturned". 30 June 2016.
- ^ a b c "Lawyers in $7.25 Bin Credit Card Settlement Seek $720 Min in Fees".
- ^ "Court approves controversial interchange fee settlement". Bank Credit News. December 17, 2013. Archived from the original on January 16, 2014. Retrieved January 14, 2014.
- ^ "EPC: NRF appeal of interchange settlement a "political ploy"". Bank Credit News. January 10, 2014. Archived from the original on January 16, 2014. Retrieved 2014-01-14.
- ^ "Visa, Mastercard $6.24B settlement gets preliminary okay from court". Seeking Alpha. February 22, 2019. Retrieved July 9, 2019.
- ^ "Westlaw Today - Premium Legal News | Thomson Reuters".
- ^ "Visa and Mastercard are profiting from higher swipe fees and growing debg, but their swipe-opoly is under fire".
- ^ "Swipeology: $5.54 billion Visa Mastercard Interchange Fee Settlement/".