Retailers Deny Visa and Mastercard’s $7.2B Settlement
Nineteen companies are opting out of a settlement offered by Visa Inc. (NYSE:V) and Mastercard Inc. (NYSE:MA) regarding transaction-processing fees, saying that if the offer was accepted it would not stop swipe fees from rising, and would prevent retailers from taking legal action in the future.
Large retailers including Wal-Mart Stores Inc. (NYSE:WMT), Costco Wholesale Corp. (NASDAQ:COST), Starbucks Corp. (NASDAQ:SBUX), and Gap Inc. (NYSE:GPS), are opting out of the class-action settlement, which will lead to more battles over swipe fees. Mike Cook, senior vice president of finance and assistant treasurer for Wal-Mart, said ,”If this settlement is approved, it would allow credit card companies and big banks to perpetuate an unfair and broken system that costs all consumers, including those who don’t even have a credit or debit card.”
The suits filed by the merchants and retailers claimed that Visa and Mastercard set arbitrarily high transaction fees. The fees, which are paid by the merchant each time a customer uses a credit card, are set by Visa and Mastercard and are collected by the banks that issue the cards, including JPMorgan Chase (NYSE:JPM), Capitol One Financial Corp. (NYSE:COF), and Bank of America Corp. (NYSE:BAC). If the settlement was accepted, it would bar retailers from filing future lawsuits over transaction fees.
Visa called the settlement “a fair and reasonable compromise,” but the National Retail Federation, which represents more than 9,000 retailers across the country, rejected it. The group believes that the $7.2 billion settlement is less than retailers deserved or would have gotten in court. The National Retail Federation’s general council Mallory Duncan had harsh words for Visa and Mastercard: “No settlement at all would be better than this one-sided ‘agreement’ written by the card companies for the card companies, that would tie retailers’ hands for decades to come.”
The proposed $7.2 billion settlement would be the largest ever antitrust accord in the U.S. Since the settlement is being rejected by so many, more haggling over swipe fees and the anticompetitive system that allows credit card companies to fix those fees is to be expected.