Judge Approves Credit Card Swipe Settlement

A federal judge granted preliminary approval to a proposed $7.2 billion settlement between merchants and Visa Inc. and MasterCard Worldwide over credit card interchange fees November 9. If the deal receives final approval, it will be the largest federal antitrust settlement in U.S. history. 

Based on the terms of the settlement, all businesses accepting Visa and MasterCard payments on or before January 1, 2004, and who agree to become part of the Settlement Class, should be aware of the following: 

  • Visa, MasterCard and the card issuing banks will distribute a $6.05 billion cash payment to merchants to compensate them for previous interchange charges.  
  • Visa and MasterCard will lower card acceptance fees by 10 basis points for a period of eight months, providing $1.2 billion in additional relief to merchants — the only time period for which the networks have agreed to lower interchange fees.  
  • Surcharging: Visa and MasterCard operating rules will be updated to allow merchants to surcharge for credit transactions. There will be registration requirements and various levels of consumer disclosure required, however those requirements and criteria have not been established yet. Merchant's surcharging strategy will be required to be applied to all payment types accepted and not disadvantage a particular card brand, nor preempt state laws. Surcharging is subject to a cap and other conditions.  
  • Buying Groups: Visa and MasterCard will be required to negotiate with properly formed (in accordance with DOJ guidelines) merchant groups to negotiate interchange rates. Visa and MasterCard agree to negotiate in good faith with any buying group and at their discretion to accept or reject a proposal based on whether it is commercially reasonable.

The MDL is a class action lawsuit against Visa, MasterCard, and nine major bank credit card issuers, initiated in 2005 by major retailers. The retailers alleged Visa, MasterCard and the banks violated the Sherman Act antitrust laws – illegally fixing the price of interchange fees. The Lawsuit was scheduled for trial in September 2012.  

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