The federal appeals court panel threw out a $7.25 billion antitrust settlement on Thursday between Visa Inc
(NYSE: V) and Mastercard Inc (NYSE: MA) and millions of retailers, as some of the merchants covered by the
pact weren't adequately represented. The efforts to resolve litigation between the card industry and merchants had been lasting for
more than a decade.
According to the Wall street Journal, this settlement had been struck in 2012 and approved by a court in 2013. Visa and
MasterCard initially agreed to pay merchants $7.25 billion, but this amount was later reduced $5.7 billion as many dropped out.
As per the settlement, the merchants are separated into two categories: those that had accepted credit cards up to that point
and those that would accept them after the settlement. The deal gives right to members of the first group to opt out (8,000 or 25
percent of the total purchase volume for Visa and MasterCard), but the second group would be required to abide by the terms.
Related Link: Mastercard
At More Risk Than Visa If Settlement Fees Increase
As stated by the Wall Street Journal, the case dates back to 2005, when merchants began accusing Visa and MasterCard in lawsuits
of conspiring with card-issuing banks to set fees on transactions. Merchants pay the interchange fees that are set by Visa and
MasterCard to card-issuing banks for each transaction.
As reported by MasterCard and cited by the Wall Street Journal, the company was disappointed by the ruling and believe they had
presented a clear case to the court that the settlement was fair and appropriate based on more than four years of negotiation and
the close involvement of the District Court. Visa representative avoided to make any comments on this matter.
At Time Of Writing...
- Mastercard was up 1.15 percent on the day, trading at $89.12.
- Visa was up 0.76 percent on the day, trading at $74.73.
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