Published on December 17, 2013

Judge approves Visa, MasterCard settlement over retailers’ protests

(Tire Business file photo)

NEW YORK (Dec. 17, 2013) — A New York federal judge has approved a $5.7 billion settlement of a retailers’ lawsuit against MasterCard and Visa over credit card swipe fees, over the protests of the retailers themselves.

Judge John Gleeson of the U.S. District Court for the Eastern District of New York approved the settlement Dec. 13. However, the National Retail Federation (NRF) was only one of a number of retail associations that said the settlement was useless.

“We are very disappointed that this deeply flawed settlement has been approved,” the federation said.

“It is not supported by the retail industry and would do nothing to reduce swipe fees or keep them from rising in the future.”

The federation said it was reviewing the ruling and would take whatever steps it deemed necessary to protect its members.

Swipe fees are the fees retailers pay to card-issuing companies for processing credit and debit card transactions. The NRF says these fees are generally 2 to 5 percent of the purchase price and amount to about $30 billion a year in the U.S.

The federation and other retailers filed a class-action lawsuit against MasterCard and Visa in 2005, claiming they had limited power to negotiate with the card companies over the amount of swipe fees. Financial firms that issue credit cards countered that they are merely charging retailers for providing a service.

Two years ago, the Federal Reserve placed caps on the swipe fees charged on debit cards, but left credit card swipe fees alone.

The original settlement proposed in July 2012 was $7.2 billion. The amount was reduced because some 8,000 retailers—representing about a quarter of Visa and MasterCard volume—opted out. Wal-Mart Stores Inc. and Amazon.com Inc. were the largest retailers to opt out of the agreement.

Under the terms of the agreement, retailers have the right to charge surcharges to customers to cover swipe fees. However, at least 10 states have laws barring surcharges, the federation said.

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