Sunday, July 15, 2012

VISA, Mastercard $7.25 billion settlement.

In one of the largest antitrust settlements ever, Visa, Mastercard and their associated banks have agreed to a massive $7.25 billion settlement with U.S. retailers. The latter had sued the former over fixing of credit and debit card fees in 2005 through several lawsuits. If the settlement is approved by a judge then it should put an end to a lengthy legal battle.


The details of the settlement were submitted to Brooklyn federal court on Friday. According to the agreement, Visa, Mastercard and several banks that issue the company’s cards would make a payment to a ‘class of stores’ of $6 billion. Furthermore, the card companies will also reduce the swipe fees by 10 basis points for eight months with an estimated value of $1.2 billion.

Both Visa and Mastercard appear to be satisfied with the agreement. Noah Hanft from Mastercard  has favored the “amicable resolution”. Joseph Saunders, CEO of Visa has said believed that the settlement served the best interest of all the parties.

However, Tom Robinson from one class plaintiff, National Association of Convenience Stores has said that the “settlement fail(s) to introduce competition and transparency, it actually provides Visa and MasterCard with the tools to continue to shield swipe fees from market forces," as US retailers pay around $50 billion in swipe fees each year, several times more than the $7.25 billion settlement. Voicing further concerns, the American Bankers Association has also said that the settlement appears to favor retailers, not the consumers.  

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