Judge Approves Visa-MasterCard Settlement
U.S. District Judge John Gleeson approved the controversial settlement in the Visa-MasterCard antitrust case last week, putting what might only be a temporary end to years of litigation over how the world's largest card networks set their interchange, or “swipe,” fees.
The final settlement will only cost Visa and MasterCard $5.7 billion, which is still the largest antitrust settlement in U.S. history, but lower than the price tag originally negotiated in July 2012 of $7.25 billion in direct payments and temporary interchange rate reductions. The cost of the settlement fell due to the fact that 8,000 merchants, among them retail titans like Amazon and Wal-Mart, opted out of the deal.
Opponents were swift to respond. “We are very disappointed that this deeply flawed settlement has been approved. It is not supported by the retail industry and would do nothing to reduce swipe fees or keep them from rising in the future,” said National Retail Foundation (NRF) Senior Vice President and General Counsel Mallory Duncan. “The settlement permanently ties the hands of thousands of businesses who wanted nothing to do with this misguided case, and a decision to approve it violates established law and common sense,” she added, noting that NRF will review the case and the ruling to figure out the opportunities for an appeal.
Final approval of the ruling comes just over a year after Gleeson preliminarily approved the settlement back in November 2012. That earlier ruling allowed merchants to surcharge their customers for paying with a credit card, a practice that first became permissible under Visa and MasterCard's acceptance agreements with merchants as of January 2013. The final ruling in some ways cements a merchant's right to pass down their processing costs, at least for the time being, although it still does not supersede state-law bans on the practice of surcharging, which have come under scrutiny following a recent ruling by another judge in New York that said the state's surcharging ban was unconstitutional. Similar challenges are expected in other states in 2014 which could pave the way for more widespread surcharging.
Still, retailers, for whose benefit the settlement seemed exclusively crafted, are not expected to partake in surcharging for fear that it would drive customers to other competitors who don't engage in the practice. Additionally, some have noted that as credit cards have come to dominate consumer purchase methods, retailers have already built their card processing costs into their pricing, meaning they won't latch onto surcharging simply because they've been surcharging this whole time.
For companies that sell to other businesses, surcharging can look considerably more attractive, and this final settlement provides some small measure of certainty, although again, every company must pay close attention to state restrictions and the specific language of the settlement before implementing any form of surcharging program on card-using customers. Learn more about surcharging and B2B sales in the upcoming January 2014 issue of Business Credit, and stay tuned to NACM's blog and eNews for more information on how the ruling's final approval affects commercial creditors.
- Jacob Barron, CICP, NACM staff writer