Court Gives Swipe Fee Settlement Final Approval

NEW YORK – U.S. District Judge John Gleeson gave final approval to a $5.7-billion settlement that alleged Visa Inc. and MasterCard Inc. illegally fixed credit card interchange swipe fees.

"For the first time, merchants will be empowered to expose hidden bank fees to their customers, educate them about those fees and use that information to influence their customers’ choices of payment methods," Gleeson wrote in his ruling today in federal court in Brooklyn, N.Y.

Both Visa and MasterCard applauded final approval of the settlement, which affects thousands of convenience stores. "We are pleased that Judge John Gleeson has granted final approval to the U.S. merchant class settlement agreement," Noah J. Hanft, MasterCard general counsel, said in a statement. "Today is an important milestone in putting this litigation behind us and we look forward to working in partnership with the merchant community."

Visa CEO Charlie Scharf added that the settlement, negotiated for several years, is "fair for all parties involved."

"Today we have realized a significant achievement in our efforts to resolve the long-standing legal differences between merchants and the payments industry," said Scharf.

However, trade organizations including NACS, the Association for Convenience & Fuel Retailing, were quick to disagree with Visa and MasterCard’s statements and expressed disappointment over the court's decision.

NACS President Hank Armour had said at the Sept. 12 settlement fairness hearing hosted by the U.S. District Court for the Southern District of New York: "Losing would not bar the courthouse door to merchant challenges to future unfair card industry practices, including current bad practices being applied to new technologies like mobile payments. The settlement provides nothing of any real value beyond the money. And the scope of the release will allow the defendants to raise rates and recoup the money before it is even distributed to merchants, which is precisely what happened in the Visa check case."

Immediately following today's ruling, the Retail Leaders Industry Association issued the following statement: "The retail community remains committed to fighting this flawed settlement and addressing the fundamental lack of competition in the electronic payments market. Quite simply, the proposed settlement undermines merchants’ legal rights forever and fails to restrain Visa and MasterCard’s ability to impose higher and higher swipe fees with impunity."

NRF, formerly known as the National Retail Federation, also expressed displeasure with the ruling. Credit card swipe fees cost U.S. merchants $30 billion a year and have tripled during the past decade, the trade group claimed.

"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," NRF stated. "The settlement permanently ties the hands of thousands of businesses that wanted nothing to do with this misguided case, and a decision to approve it violates established law and common sense."

NRF said it is reviewing the ruling and will take whatever steps are necessary "to protect the rights of merchants and safeguard the pocketbooks of their customers."

Retailers first filed suit against Visa and MasterCard in 2005.