Retailers including Macy’s Inc. (NYSE:M) and Target Corp. (NYSE:TGT) are suing Visa Inc. (NYSE:V) and MasterCard Inc. (NYSE:MA) over swipe fees after turning down a $7.2 billion settlement offered by the credit card companies.
Millions of merchants affected by the settlement have until May 28 to either accept the money offered by Visa and MasterCard or to pursue their own legal action. The credit card companies are accused by merchants of inflating interchange fees and violating antitrust laws.
Interchange or swipe fees are paid by the merchant each time a customer uses a credit card. The fees 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).
Also named as plaintiffs in the suit are JC Penney Co. Inc. (NYSE:JCP) and Kohl’s Corp. (NYSE:KSS). Other retailers that have opted out of the settlement, but have not yet been added to the suit, include Wal-Mart Stores Inc. (NYSE:WMT), Costco Wholesale Corp. (NASDAQ:COST), and Starbucks Corp. (NASDAQ:SBUX).
The settlement offered by Visa and MasterCard has been heavily criticized by retailers, who claim that accepting it would leave them unable to take legal action over swipe fees in the future. Retailers also believe that the $7.2 billion offered isn’t enough. Lawyers for the retailers said, “Over the past decade, judicial efforts to curb the exercise of market power by the Visa and MasterCard combinations have been ineffective.”
Those words echo a similar statement made by Wal-Mart senior vice president of finance and assistant treasurer upon announcing that Wal-Mart would turn the settlement down: ”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.”
Visa and MasterCard have said they are confident the settlement would win final approval, but didn’t comment on the new lawsuit. If the settlement, which received preliminary court approval from a federal judge in November, passes, retailers will be subject to injunctions like changes in the credit card companies’ swipe fee rules.
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