Houston, Texas, USA : Mastercard Inc (MA.N), Visa Inc (V.N), and a number of U.S. banks agreed on Tuesday to pay $6.2 billion to settle a long-running lawsuit brought by merchants over the fees they pay when they accept card payments.
Visa and Mastercard previously reached a $7.25 billion settlement with the merchants in the case, but that deal was thrown out by a federal appeals court in 2016 and the U.S. Supreme Court last year refused to revive it.
The deal had been the largest all-cash U.S. antitrust settlement, although its value shrank to $5.7 billion after roughly 8,000 retailers opted out.
The card issuers named in the class-action lawsuit include JPMorgan Chase & Co (JPM.N), Citigroup (C.N) and Bank of America (BAC.N).
The lawsuit, brought on behalf of about 12 million retailers and dating back more than a decade, accuses the credit card companies of violating federal antitrust laws by forcing merchants to pay swipe fees and prohibiting them from directing consumers toward other methods of payment.
In rejecting the earlier settlement, which was opposed by retailers including Amazon.com Inc (AMZN.O), Costco Wholesale Corp (COST.O) and Walmart Inc (WMT.N), a federal appeals court found that the accord was unfair because some retailers would receive little or no benefit.
The card companies have already paid $5.3 billion and will now pay an additional $900 million.
Visa’s share represents around $4.1 billion, which the company expects to pay using funds previously deposited with the court, and from a litigation escrow it set up on June 28.
The settlement must still be approved by a court.
In a statement, Visa said Tuesday that it’s share of the total settlement amount represents about $4.1 billion, which will be satisfied through funds previously deposited with the court plus the $600 million deposited by the company into its litigation escrow on June 28, 2018.
Visa added that no additional funds are required for this class settlement. The company’s share is covered under its U.S. Retrospective Responsibility Plan created to insulate the company and class A shareholders from financial liability for certain litigation cases.
Mastercard will pay an additional $108 million from funds set aside in the second quarter, the company said. See Mastercard statement below.
Mastercard Reaches Agreement to Settle Monetary Damages Related to U.S. Merchant Litigation
Mastercard has reached an agreement to settle monetary damages claims in the U.S. merchant class-action litigation. The agreement formalizes prior discussions and has been executed by all of the defendants – including Mastercard, Visa and a number of banks – and the court-appointed class counsel for the merchants.
The settlement is an amendment to the financial terms of the 2012 Class Settlement Agreement and will be filed with the court seeking approval.
“We are taking a significant step toward closing a chapter in a long-standing case,” said Tim Murphy, general counsel, Mastercard. “We can put this behind us and focus on continuing to innovate with our merchant partners to deliver the experience and convenience that consumers expect.”
In addition to the original 2012 monetary terms, Mastercard’s share of the financial agreement is an additional $108 million, which is based upon the allocation of financial responsibility that was set out in the judgment and settlement sharing agreements that were executed in February 2011. In total, the defendants have agreed upon an additional payment of $900 million in the current agreement.
The company recorded a $210 million charge in its second-quarter 2018 financial statements, which will cover the financial obligation under this agreement and for estimated liabilities related to filed and anticipated opt-out merchant cases.
The merchant class-action that seeks the revision of network rules is not covered by this settlement agreement. That action remains outstanding while the parties are engaged in settlement negotiations.
After court approval of the monetary agreement, Mastercard and its customer financial institutions will receive a release of all monetary claims alleged by the merchant class members concerning the company’s interchange and fee structure and merchant acceptance rules. This release covers all previous, as well as future claims, for a period of five years after resolution of all appeals.