MasterCard And Visa vs U.S. Retailers: Antitrust Settlement Thrown Out

A Visa and MasterCard antitrust settlement, for a whopping $7.25 billion, was thrown out in a decision made by the 2nd U.S. Circuit Court of Appeals in New York last Thursday (June 30).

The lawsuit, between the two card-issuing companies and multiple retailers across the country, alleged that Visa and MasterCard were fixing credit and debit card fees, to the detriment of the retailers.

The retailers claimed that when customers used their credit or debit cards for transactions, the card companies overcharged merchants for interchange/swipe fees (which total an estimated $60 billion annually). The retailers also weren't allowed to direct their customers to cheaper payment methods.

"This is not a settlement; it is a confiscation," wrote Circuit Judge Pierre Leval, a member of the panel.

"Swipe fees are an improper and unnecessary hidden tax on consumers. The structure of swipe fees is back on the table," Constantine Cannon partner Jeffrey Shinder said in a statement on the decision. His firm represents Amazon, Costco Wholesale, Wal-Mart, and other retailers in the litigation.

The antitrust settlement can now be renegotiated, but it can also go to trial.

Legal battles between Visa, MasterCard, and an estimated 12 million U.S. retailers have been raging for roughly a decade. The two corporations were hoping to finally end the saga through this $7 billion settlement.

The settlement has been supported and opposed by parties on both sides. In 2013, when a U.S. District Judge in New York approved settlement, several retailers protested, concerned that the amount wasn't enough or that it made it more difficult for them to sue Visa and MasterCard. Even American Express and Discover opposed it.

Spokespeople for both Visa and MasterCard told Reuters that they're reviewing their next steps in the process.

Visa and MasterCard, known to be rivals, were caught up in a separate legal issue earlier this year as well. During the switch to microchip-enabled credit and debit cards, The Recorder reported that Visa, MasterCard, Bank Of America, and CitiGroup were accused of shifting more fraud liability to retailers who didn't make accommodations in their stores for the new technology by October 1, 2015.

Retailers sued the card issuers, insisting they weren't given any advance notice or the chance to opt out. Small businesses in particular said they had a hard time, especially with the expense required to implement the new technology.

Visa, currently the world's largest credit and debit card company, is also reportedly dealing with a sticky situation overseas. In the wake of the U.K.'s shocking Brexit decision earlier this month, several companies with bases there may be preparing to leave the country entirely, meaning substantial layoffs.

According to Sky News, Visa's European institution recently made a deal with their American sister company, and a stipulation in that £17.5 billion (about $23 billion) contract is that Visa's data transactions can't leave Europe. If this is true, the U.K.'s separation from the Union means a complication.

"The process and timing for the U.K. leaving Europe remains unclear. It is premature to speculate on whether possible changes to the location of our data centers would make sense or be required," a spokeswoman for Visa said in a statement.

The $7.25 billion all-cash Visa and MasterCard antitrust settlement would've been the largest ever in the U.S., even though it decreased to about $5 billion when 8,000 retailers opted out entirely.

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