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NAW Legal Advisory

Wholesaler-Distributors May Benefit From Tentative $7.5 Billion Settlement of Antitrust Claims Against Visa, MasterCard and Major U.S. Banks

Updated July 2012

On July 13, 2012, a proposed settlement was reached on behalf of a class of approximately 7 million merchants—including wholesaler-distributors—in the U.S. who have accepted payments at any time since January 1, 2004 via Visa or MasterCard credit or debit cards. Contrary to some media reports, the settlement was not limited to retailers. The proposed settlement was reached with Visa, MasterCard and the major card-issuing banks in the U.S. The settlement is subject to a number of conditions, including approval by the U.S. District Court for the Eastern District of New York where this class action antitrust suit is pending. (In Re: Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, No. 05-MD-1720).

The settlement includes a cash payment and changes to Visa and MasterCard rules and business practices. Cash payments from the defendants would total $6.05 billion and the card companies have agreed to reduce so-called swipe fees for eight months, valued at $1.2 billion according to plaintiffs’ counsel. Additional payments will be made to twenty-two companies who filed separate non-class action suits against the defendants. The amount available for payment to merchants will be reduced by payment of plaintiffs’ attorneys fees, expenses and costs to administer the settlement payment process.

The settlement would also mandate extensive changes to the Visa and MasterCard rules to become effective within sixty days of preliminary court approval of the settlement. Most notably, the card company rules must allow merchants to impose a limited surcharge to customers using a credit card for a purchase, provided the merchant makes required disclosures of its surcharging practices to customers.

If the court approves the settlement, notices will be sent to the merchants who are members of the class (generally any business or other person that has accepted Visa or MasterCard cards for purchases in the U.S. since January 1, 2004) with full details of the settlement and the merchant’s rights and options as a result of the settlement. Counsel for plaintiffs estimates that the notices will be sent out in late 2012 or early 2013.