By Andrew Longstreth
NEW YORK Dec 13 A U.S. federal judge on Friday
approved an estimated $5.7 billion class action settlement
between merchants and Visa Inc and MasterCard Inc
over credit card fees despite objections from thousands of
retailers who complained it was inadequate.
The settlement is believed to be the largest in a U.S.
antitrust class action.
Merchants first sued Visa and MasterCard in 2005, accusing
the two companies of fixing the fees charged to merchants each
time their customers used their credit or debit cards. They were
accused also of preventing merchants from steering customers to
cheaper forms of payments.
U.S. District Judge John Gleeson of Brooklyn, New York,
approved the settlement in a written order. He also dismissed
some of the objections made by merchants opposed to the deal as
At a fairness hearing in September, he noted that one
objector cast Visa and MasterCard as Nazis.
"I conclude that the proposed settlement secures both a
significant damage award and meaningful injunctive relief for a
class of merchants that would face a substantial likelihood of
securing no relief at all if this case were to proceed," Gleeson
The value of the settlement, reached last year, decreased to
$5.7 billion from roughly $7.2 billion after thousands of
merchants opted out of the deal, according to Craig Wildfang, an
attorney for the plaintiffs.
Mallory Duncan, general counsel for the National Retail
Federation, which opposed the settlement, said in a statement
that her organization was reviewing Gleeson's ruling and
expected to file an appeal.
"The settlement permanently ties the hands of thousands of
businesses who wanted nothing to do with this misguided case,
and a decision to approve it violates established law and common
sense," she said.
The settlement provides for cash payments to merchants
nationwide and lets them begin charging customers an extra fee
when they use Visa or MasterCard credit cards.
For Visa and MasterCard, Gleeson's decision could go a long
way to alleviate a major legal headache that has plagued them
for more than a decade.
In 2003, two years before the current case started, Visa and
MasterCard settled a similar case with merchants over rules
governing the use of their cards.
Visa Chief Executive Officer Charlie Scharf said in a
statement that the company "realized a significant achievement
in our efforts to resolve the long-standing legal differences
between merchants and the payments industry."
MasterCard general counsel Noah Hanft called Gleeson's
decision "an important milestone in putting this litigation
behind us," according to a statement.
Approval of the current settlement has been opposed by many
of the largest players in the retail industry.
Around 8,000 merchants, accounting for about 25 percent of
the transactional volume at issue in the case, opted out of the
Among those opting out were the largest retailers in the
United States, including Wal-Mart Stores Inc, Amazon.com
Inc, and Target Corp.
Those businesses have complained about a broad litigation
release in the settlement. The release forces all merchants who
accepted Visa or MasterCard, and even those who will in the
future, to give up their right to sue the credit card companies
over rules at issue in this case or similar ones they may make
in the future.
Those objectors also argued that the settlement offered
meaningless reforms that would not help them control the costs
of accepting credit cards.
Under certain circumstances, the settlement allows merchants
to charge customers extra if they use Visa or MasterCard credit
cards. But critics of the deal point out that those
opportunities are extremely limited, and certain states prohibit
such surcharging. The critics also say that merchants are
unlikely to take advantage of surcharging for fear of upsetting
consumers or losing them to competitors that do not impose a
Many retailers who opted out of the settlement have filed
their own lawsuits.
The case is In Re Payment Card Interchange Fee and Merchant
Discount Antitrust Litigation, U.S. District Court for the
Eastern District of New York, No. 05-1720.