In December 2013, U.S. District Judge John Gleeson approved an estimated $5.7 billion settlement in a lawsuit that pitted Visa and MasterCard against a number of large and small retailers. The battle that created this was over credit card processing fees that the card companies charge retailers every time a customer wants to pay with plastic. The complaint was that the card companies were colluding to inflate the fees.
While that settlement seems like a nice payout, many of the retailers involved were not happy about it. This happened for several reasons, including the final amount not being enough money, the deal was agreed upon behind close doors and it did not actually put an end to the original problem. Because of this, a number of retailers pulled out of the settlement and the others appealed.
While the original suit is still in a legal battle, the retailers who opted out of the original settlement have filed separate suits. According to an article from Bloomberg, Visa and MasterCard have lost a battle to have more than 30 lawsuits tossed out that have been filed by various retailers that include Target, Macy's and Wal-Mart.
The allegations are the same as they were in the original lawsuit. They claim that companies have obtained and are maintaining "market power" and are using it to force merchants to pay excessive interchange fees. The suits also claim that they have created a monopoly that allows them to dictate price and inhibit competition.
Visa and MasterCard do have a counter, saying that the merchants' claims for damages should be barred by legal releases in an early settlement in 2003. They also claim that the suit should be thrown out because merchants don't directly pay fees to banks that issue the cards. The fees are deducted from payments merchants receive after processing.
Despite the card providers' pleas, these news suits will remain on the books. According to Gleeson, who also ruled in this case, his decision to not dismiss was "in large part driven by the requirement that I accept all well-pleaded factual allegations as true because the cases were in the early stages of litigation. It isn't a ruling on the merits of the complaints."
However, the card providers did get one victory, when Gleeson denied a request by some of the merchants to dismiss lawsuits against them that have been filed by card firms that are looking to stop this litigation over the fees.
Lawyers for both card providers issued statements saying that they were looking forward to finally putting this issue to bed after years of litigation. They also pointed out that this is still the early stages of the case.
Once again, merchants will need to keep their eyes and ears open to follow this lawsuit and its outcome. Regardless of the outcome, this is going to impact credit card processing and the way that businesses accept payments. Instead of trying to understand the outcome of the suit on your own, businesses should partner with a payment solution provider that can explain the outcome easily.