More Merchants Reach Visa/MasterCard Swipe Fee Settlement

Dozens of merchants filed a stipulation in New York federal court dropping all of their claims against major credit card companies Visa Inc. and MasterCard Inc. on Friday.

A multitude of online retailers and vendors that accept payments from Visa and MasterCard sued those credit card companies in 2005 alleging anticompetitive practices. The Visa/MasterCard class action lawsuit claimed that the companies unfairly increased the “interchange” fees that the merchants were forced to pay to accept the credit cards. The plaintiffs further alleged that the credit card companies and banks conspired to inflate the fees. The plaintiffs claimed that the interchange fees were kept artificially high by the banks and credit card companies and, in fact, much higher than they should have been in a competitive marketplace.

After years of litigation, the plaintiffs’ claims were trimmed to those related to credit card companies’ restrictions on merchants that accept their cards and their practice of imposing fees on merchants who accept their cards. When U.S. District Judge John Gleeson approved the class action settlement in December 2013, the Class Members objected. Class Members raised concerns about the fairness of the deal, pointing out that the swipe fee settlement would not stop the credit card companies from implementing the same sort of allegedly unfair fee structure in the future.

“The oral presentations of the objectors at the fairness hearing were afflicted by needless hyperbole,” Judge Gleeson wrote in his order. “One of the merchant association principals who participated in the settlement discussions and initially agreed to its terms argued that the members of his association would be worse off if I approved the proposed settlement than they would be if they proceeded all the way through trial and lost,” the judge continued.

The companies exiting the swipe fee class action lawsuit on Friday, including retail giants like Bass Pro Shops, Joe’s Crab Shack and Crocs Online, had protested a settlement agreement with Visa and MasterCard that would have awarded $7.25 billion, but would not have stopped the credit card companies from continuing to charge interchange fees and conspire with banks.

Other companies, led by American Express and Blue Cross Blue Shield, are waiting for a determination about whether the proposed settlement improperly releases Visa and MasterCard from future antitrust claims from the Second Circuit. The Second Circuit also has to rule on whether class cohesion is appropriate under the terms of the settlement and if the settlement prohibits members from pursuing individualized claims.

A growing number of merchants, however, have opted to dismiss the class action lawsuit in undisclosed settlement agreements, including 1-800 Contacts Inc., Ethan Allen Inc., Tiffany & Co. and Williams Sonoma Inc.

The plaintiffs are represented by attorneys from Crowley Norman LLP, Nix Patterson & Roach LLP, Beck Redden LLP and Strange & Carpenter.

The Visa/MasterCard Swipe Fee Class Action Lawsuit is In re: Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, Case No. 1:05-md-01720, in the U.S. District Court for the Eastern District of New York.

UPDATE: On June 30, 2016, 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.

UPDATE 2: 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 3: 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 4: 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 5: 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 6: 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.