Newsroom

June 30, 2016

Appeals court voids settlement over Visa, MasterCard fees

A federal appeals court in New York on Thursday voided a $7.25 billion antitrust settlement that Visa and MasterCard reached with millions of retailers, saying the agreement was unfair to retailers.

The 2nd U.S. Circuit Court of Appeals in New York said "the accord was unfair to retailers that stood to receive no payments, and in the court's view, little or no benefit at all," according to Reuters.

"This decision creates additional and unnecessary marketplace uncertainty," said NAFCU Executive Vice President of Government Affairs and General Counsel Carrie Hunt. "We will be monitoring the impact of this decision on credit unions."

Because 25 percent of the retailers (about 8,000) opted out of the settlement, the value was reduced to about $5.7 billion when it was approved in 2013. The settlement had been the largest in private antitrust history.

The settlement was reached following a group of 2005 lawsuits from retailers that became a class action. The suits alleged card companies overcharged on interchange, or swipe fees, and that they did not allow stores to encourage consumers to pay in other ways. The deal established collective negotiation between merchants and card companies over interchange fees, which would be subject to a cap.

The settlement broke the class into two groups – those that accepted Visa and MasterCard between 2004 and 2012 and those who would accept the cards going forward. The appeals court Thursday decertified the case as a class action and said the two retailer classes should not have been represented by the same lawyer.

The case now returns to federal court in Brooklyn.