A judge on Dec. 13 approved a $5.7-billion class action lawsuit against Visa and MasterCard that challenged excessive credit card fees.
The suit had been brewing for some time with merchants first suing the two credit companies in 2005. Visa and MasterCard were accused of having fixed fees that charged merchants every time a customer used one of these credit cards, Reuters reported. These were commonly referred to as "swipe fees" or "interchange fees."
Judge says settlement works for both sides
The settlement was approved by U.S. District Judge John Gleeson in a written order, but advised merchants that some of their claims were a little extreme.
"I conclude that the proposed settlement secures both a significant damage award and meaningful injunctive relief for a class of merchants that would face a substantial likelihood of securing no relief at all if this case were to proceed," Gleeson said.
Several businesses not pleased
The original total of the settlement was $7.2 billion, but that was decreased to $5.7 billion after a number of businesses opposed the deal. Reuters reported that approximately 8,000 merchants, including major retailers such as Amazon, Target and Wal-Mart, opted out of the settlement because of broad definitions in the settlement.
Merchants who took the settlement will not be able to sue either of the companies if something along these lines happens again. For those that took the settlement, they will be allowed to charge customers extra if they use one of these credit cards in certain situations, but many believe these circumstances are very limited and some states do not even allow this type of charging. The National Retail Federation General Counsel Mallory Duncan said that the wording of the settlement is not what they initially wanted.
"We are very disappointed that this deeply flawed settlement has been approved," Duncan said. "It is not supported by the retail industry and would do nothing to reduce swipe fees or keep them from rising in the future."
Several of the retailers who have opted out of the settlement will be filing their own lawsuits, Reuters reported.
Lower prices in stores
Despite the fact that many merchants were unhappy about the settlement, experts feel it will help reduce prices for certain products The Washington Post reported.
"It will reduce the fees and overall prices that consumers pay, which is good for merchants and consumers," Attorney Patrick Coughlin told The Washington Post. "There will be more transparency in the pricing."
Credit companies glad suit is over
Representatives from Visa and MasterCard are hoping this settlement will go a long way in resolving issues regarding fees among merchants. Before the current case was filed, the two credit card companies dealt with a similar case with others voicing their concerns about rules with the use of their cards in 2003. MasterCard General Counsel Noah Hanft said that this deal will help out the two companies move past the previous litigations. Visa Chief Executive Charlie Scharf said this resolution will help the company move on and carry on business as usual.
"We have realized a significant achievement in our efforts to resolve the long-standing legal differences between merchants and the payments industry," he said. "We are confident that through this agreement we have opened the door to new opportunities for collaboration with our merchant clients."