$7B Visa, MasterCard Swipe Fee Settlement Rejected by 2nd Circ.

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Yesterday, the 2nd U.S. Circuit Court of Appeals rejected a $7.25 billion antitrust settlement with merchants over Visa and MasterCard’s swipe fees, finding that merchants who accept the cards after the settlement is finalized would not be adequately represented in the deal.

The antitrust class action settlement was initially reached in 2012, and would have resolved allegations reaching back nearly a decade that Visa and MasterCard engaged in anticompetitive behavior with regard to “swipe fees,” forcing merchants who accepted the credit cards to be charged higher interchange fees than they would have paid in a competitive market.

The Visa/MasterCard swipe fee settlement received final approval on Dec. 13, 2013, and would have been the largest antitrust settlement in history. Around 12 million merchants were included as Class Members in the settlement.

Hundreds of merchants appealed the settlement, arguing that the deal is unlawful because it grants Visa and MasterCard “sweeping prospective immunity” from future litigation, despite any major technological advances or other important changes in circumstance.

Under the terms of the Visa/MasterCard swipe fee settlement, Class Members were split up into two Classes. One Class was entitled to a share of the $7.25 billion settlement fund while the second Class was only entitled to injunctive relief.

The 2nd Circuit found that the settlement was unfair to the injunctive relief Class because Class Members did not have the opportunity to opt out of the deal and had to give up their rights to take future legal action against Visa and MasterCard on certain issues.

One judge wrote that the swipe fee settlement “binds not only members of the Plaintiff class who receive compensation as part of the deal, but also binds in perpetuity, without opportunity to reject the settlement, all merchants who in the future will accept Visa and MasterCard.”

Further, the judges found that the Class representatives did not adequately represent the interests of all of the Class Members. “Class representatives had interests antagonistic to those of some of the class members they were representing,” Circuit Judge Dennis Jacobs said. “The fault lines were glaring as to matters of fundamental importance.”

The appeals court decertified the Class certification and reversed approval of the settlement, sending it back to a lower court for reconsideration.

The court-authorized Payment Card Interchange Fee Settlement website has been updated to include a copy of the 2nd Circuit’s opinion. Because the final approval order has been vacated, the settlement is no longer valid and no Claim Forms are currently available. Top Class Actions will update our readers as soon as claim filing instructions or other case updates become available.

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The Visa, MasterCard Swipe Fee Class Action Lawsuit is In re: Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, Case No. 12-4671, in the 2nd U.S. Circuit Court of Appeals.

UPDATE: On Dec. 1, 2016, merchants seeking to wrap up a credit card swipe fee class action settlement are appealing their case to the U.S. Supreme Court.

UPDATE 2: June 2018, Visa and MasterCard are approaching a settlement deal over a swipe fee class action lawsuit after more than a decade of litigation. The settlement amount is estimated to be around $6.5 billion and is expected to be reached by mid-July.

UPDATE 3: On Sept. 18, 2018, Visa, MasterCard, and numerous banks including Bank of America, Barclays, JPMorgan Chase, Citibank, and SunTrust Bank, have reached a new $6.2 billion settlement deal to resolve a massive antitrust swipe fee multidistrict litigation.

UPDATE 4: On Jan. 24, 2019, a New York federal judge preliminarily approved a massive Visa, Mastercard swipe fee settlement, which would add an additional $900 million for merchant Class Members.

UPDATE 5: March 2019, a settlement website has recently been established for Class Members in the Visa, Mastercard swipe fee class action lawsuit. While Claim Forms are not currently available, the website provides an opportunity for Class Members to pre-register to receive one.