As reported by the Washington Post (click here to see full story), a federal court on Friday, December 13 approved the largest private antitrust settlement in history when it gave Visa and MasterCard the go-ahead on a $5.7 billion class-action settlement to resolve merchant complaints over the fees they are charged each time a customer swipes a credit or debit card. The ruling comes after years of litigation and is not enough to quell the anger of retailers, who say the agreement does not prevent the credit card giants from imposing higher fees with impunity. In fact, the settlement fell from $7.2 billion to $5.7 billion as 8,000 merchants, including WalMart and Target, bowed out of the deal because it forces merchants that accept Visa or MasterCard to waive their right to sue the companies over swipe fees.
Retailers first sued Visa and Mastercard in 2005 over “swipe fees,” also known as interchange fees. Card processors, such as Visa and MasterCard, set swipe-fee rates, but merchants pay banks the fee each time a customer uses plastic. Swipe fees are typically 2 to 5 percent of the purchase price. Merchants have argued that they have limited power to negotiate the amount of the fees, which cost them and their customers about $30 billion a year, according to the National Retail Federation. They have also accused credit card companies of barring them from steering shoppers to cheaper forms of payment. Financial firms contend that they are charging retailers for providing a service that helps their businesses. The government stepped into the fray two years ago, when the Federal Reserve placed caps on swipe fees for debit cards but not credit cards.
The National Retail Federation, a trade group, said in a prepared statement that the settlement “is not supported by the retail industry and would do nothing to reduce swipe fees or keep them from rising in the future.” They are considering appealing and have the backing of several retail organizations, including the National Association of Convenience Stores and National Community Pharmacists Association, that say the deal will not change the fighting between merchants and card companies.