Payment card interchange fee and merchant discount antitrust litigation Settlements and Consequences

In 2005, Visa and Mastercard agreed to settle antitrust lawsuits filed by merchants, which resulted in a $7.25 billion settlement to be distributed among merchants who accepted Visa and Mastercard credit cards between 2004 and 2008.

The settlement was a result of claims that Visa and Mastercard had engaged in anticompetitive practices by setting interchange fees too high, thereby stifling competition and increasing costs for merchants.

Merchants who accepted Visa and Mastercard credit cards during the specified period were eligible for a share of the settlement, with payments ranging from $100 to $1,500 per merchant, depending on the volume of transactions processed.

The settlement marked a significant shift in the way payment card interchange fees were regulated, with the Federal Reserve implementing new rules to limit the fees that banks could charge merchants.

Operating a payment processing network can be a complex and high-risk endeavor. This is because many parties are involved, including the customer and their bank, as well as the merchant and their bank.

Few companies have faced more antitrust lawsuits both in the US and abroad. This suggests that the risk of engaging in anticompetitive practices is a significant concern.

The payment service providers have been at the center of many of these lawsuits.

A settlement of $6.24 billion got preliminary approval in November 2019.

The settlement was proposed in a class-action lawsuit filed in 2005 by merchants and trade associations against Mastercard and Visa, alleging price-fixing practices.

In November 2012, a federal judge granted preliminary approval to the settlement, allowing the potential seven million or more members of the class to begin the process of opting in or out.

About one-fourth of the named class plaintiffs have decided to opt-out of the settlement. Opponents object to provisions that would bar future lawsuits and prevent merchants from opting out of significant portions of the proposed settlement.

The law firms appointed to lead the plaintiffs asked for $720 million in fees in April 2013, which would be one of the largest awards of legal fees in American history if approved.

In 2012, a federal judge granted preliminary approval to a proposed settlement in a class-action lawsuit filed by merchants against Mastercard and Visa, alleging price-fixing practices.

The settlement, worth $6.24 billion, was intended to bar future lawsuits and prevent merchants from opting out of significant portions of the proposed settlement.

Opponents of the settlement objected to provisions that would bar future lawsuits and prevent merchants from opting out of significant portions of the proposed settlement.

The plaintiffs alleged that Visa Inc. and Mastercard fixed interchange fees, also known as swipe fees, that are charged to merchants for the privilege of accepting payment cards.

In 2019, a settlement of $5.54 billion was approved, but certain merchants appealed the settlement and were heard.

The case is ongoing as of October 2022, with the U.S. Department of Justice filing a civil antitrust lawsuit against Visa alleging "monopolization and other unlawful conduct in debit network markets in violation of Sections 1 and 2 of the Sherman Act."

A settlement was announced in March 2024 to reduce what are known as "swipe fees" for merchants in the U.S., saving retailers about $30 billion and marking the end of a long-standing legal battle over antitrust issues involving these two major credit card issuers.

Visa's CEO told analysts that the company is seeking a new settlement, which could occur before, during or even following a trial.

In 2012, a group of plaintiffs appealed to have the settlement invalidated, arguing that it violated their rights by not allowing them to opt out of some provisions.

The United States Court of Appeals for the Second Circuit ruled in January 2013 that any appeals against the settlement would not be heard until objections to the settlement are filed and considered by the trial court in September 2013.

The case was later overturned in June 2016, with the court ruling that class counsel could not adequately represent merchants who had a significant interest in the monetary relief provided by the settlement.

In December 2013, U.S. District Court Judge John Gleeson approved a settlement in the case that amounted to $7.25 billion, but it was later reversed.

Judge Gleeson retained Alan Sykes as an independent expert to help evaluate the proposed settlement, and he was appointed to advise the court on any economic issues that may arise in connection with final approval of the settlement.

Legal fees can be a significant aspect of litigation and settlement. In the case of the plaintiffs in this lawsuit, the three lead law firms asked for $720 million in fees in April 2013.

This amount represents about 4.5 times what would normally be billed at an hourly rate for the work performed. The law firms in question are Robins, Kaplan, Miller & Ciresi; Berger Montague; and Robbins Geller Rudman & Dowd LLP.

Any fees awarded will be split among about 40 different law firms. The distribution of fees is normally decided by lead counsel.

The payment card interchange fee and merchant discount antitrust litigation involved multiple parties, including Visa and Mastercard, the major credit card companies, and thousands of merchants who accepted their cards.

These merchants, such as Walmart and Target, filed a class-action lawsuit against the credit card companies, alleging that the interchange fees were anticompetitive and harmed consumers.

The credit card companies, on the other hand, argued that the interchange fees were necessary to cover the costs of operating their networks and that they were a legitimate business practice.

The parties involved in this case are numerous, with many of the largest credit card-issuing American banks serving as defendants.

JPMorgan Chase, Bank of America, CitiBank, Wells Fargo, and Capital One are among the banks named in the case.

The National Association of Convenience Stores, the National Grocers Association, the National Restaurant Association, and the National Community Pharmacists Association are among the class plaintiffs.

These organizations have joined forces to take on the major credit card companies.

Laddie Montague, Merrill Davidoff, and Michael Kane of Berger Montague, and Craig Wildfang, Thomas Undlin, and Ryan Marth of Robins Kaplan Miller & Ciresi, are among the co-lead class counsel.

Their expertise will be crucial in guiding the plaintiffs through the litigation process.

Counsel for Visa include Robert Vizas, Robert Mason, Mark Merley, and Matthew Eisenstein of Arnold & Porter.

These lawyers will be representing the interests of Visa in the case.

Counsel representing MasterCard include Keila Ravelo, Wesley Powell, and Matthew Freimuth of Willkie Farr & Gallagher, and Kenneth Gallo, Joseph Simons, Andrew Finch, and Gary Carney of Paul Weiss Rifkind Wharton & Garrison.

ATM operators have been suing Mastercard and Visa in a class action, claiming their rules fix ATM access fees and restrain trade in violation of federal law.

The National ATM Council and independent operators have filed the lawsuit, alleging that Mastercard's and Visa's network rules prohibit offering lower prices for transactions over PIN-debit networks not affiliated with Visa or Mastercard.

This price-fixing artificially raises the price that consumers pay using ATMs, limits the revenue that ATM operators earn, and violates the Sherman Act's prohibition against unreasonable restraints of trade.

According to Johnathan Rubin, an attorney for the plaintiffs, Visa and Mastercard are the ringleaders of a conspiracy among U.S. banks to fix the price of ATM access fees, keeping competition at bay.

In the United States, the payment card industry is dominated by a few large players, including Visa and Mastercard.

The US Supreme Court has ruled that payment card networks can impose interchange fees on merchants, but the fees must be "reasonable" and not harm competition.

Interchange fees in the US average around 1.5% of the transaction amount, with some fees reaching as high as 3%.

Merchants in the US often pass these fees on to consumers through higher prices, which can be frustrating for customers.

The US government has taken steps to regulate interchange fees, including the Durbin Amendment, which capped fees for debit cards at 21 cents per transaction.

The ongoing developments in the payment card interchange fee and merchant discount antitrust litigation are complex and multifaceted.

In September 2024, the U.S. Department of Justice filed a civil antitrust lawsuit against Visa, alleging monopolization and other unlawful conduct in debit network markets.

A settlement in the injunctive relief portion of the payment card interchange fee case was announced in March 2024, aiming to reduce swipe fees for merchants in the U.S. by at least four basis points for the next three years.

The reduced fees are expected to save retailers about $30 billion and mark the end of a long-standing legal battle over antitrust issues involving major credit card issuers.

Visa's CEO stated that the company is seeking a new settlement, which could occur before, during, or even following a trial, after the U.S. District Court for the Eastern District of New York declined to provide preliminary approval on June 25, 2024.

The law firms leading the plaintiffs in this case requested $720 million in fees in April 2013, which, if approved, would be one of the largest awards of legal fees in American history.