Mastercard and Visa were sued for antitrust violations by several merchants who claimed that the credit card companies conspired to fix the interchange and discount fees they charged merchants for processing card transactions. The merchants argued that these fees were artificially high and harmed consumers by increasing retail prices and reducing consumer choice.
The lawsuit was consolidated in the US District Court for the Eastern District of New York and became part of a multidistrict litigation (MDL) under the name In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation. The antitrust lawsuit was filed in 2004 by merchants, including retailers, restaurants, hotels, gas stations, car washes, and others.
Who Won the Lawsuit?
In 2018, after 13 years of litigation, Mastercard and Visa agreed to settle the lawsuit for $6.2 billion, the largest antitrust settlement in US history. The settlement also included some of the largest banks in the US, such as Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, and others.
The settlement required Mastercard and Visa to pay $5.25 billion to the merchants as a class action settlement fund, which would be distributed to eligible merchants based on the number of transactions processed by Mastercard or Visa between January 1, 2004, and December 31, 2013.
The settlement also required Mastercard and Visa to implement various reforms to prevent future antitrust violations, such as:
- Establishing an independent board committee to monitor compliance with antitrust laws
- Creating a new entity called Mastercard Solutions LLC to provide payment processing services to merchants
- Limiting the interchange fees that Mastercard can charge its member banks
- Limiting the merchant discount fees that Mastercard can charge its member banks
- Allowing merchants to choose alternative payment methods or processors
- Allowing merchants to opt out of certain fee structures or programs
- Allowing merchants to sue Mastercard or Visa individually if they believe they have been harmed by anticompetitive conduct
A federal judge approved the settlement in September 2018, and it became effective in October 2018. The settlement also included a $1.25 billion civil penalty imposed by the US Department of Justice (DOJ) on Mastercard for violating antitrust laws.
Can Retailers Sue Mastercard and Visa for Antitrust Violations?
Retailers can sue Mastercard and Visa for antitrust violations if they believe credit card companies have engaged in unfair business practices that harm their business or consumers. However, retailers may face some challenges in suing Mastercard and Visa, such as:
- Credit card companies may have strong defenses based on their contracts with banks, interchange, and merchant discount fee policies, and compliance with antitrust laws.
- The credit card companies may have large financial resources and influence to counter any lawsuits or settlements they are involved in.
- Credit card companies may have agreements with banks or other payment processors that limit the ability of retailers to choose alternative payment methods or processors.
- Credit card companies may have agreements with banks or other payment processors that allow them to opt out of certain fee structures or programs that benefit retailers.
Therefore, retailers who want to sue Mastercard and Visa for antitrust violations need to consult with experienced antitrust lawyers who can advise them on the merits of their claims, the potential risks and benefits of litigation, and the best strategies to pursue their goals.
Tips for Merchants and Consumers
Navigating the maze of credit card transactions might seem intimidating. But with some knowledge in your pocket, merchants and consumers can make more informed decisions. Let’s break this down into actionable tips.
For Merchants
- Comparison Shop for Processing Rates: Just as you’d compare suppliers for your business, compare credit card processors. Some may offer better rates or more favorable terms than others.
- Understand Your Contract: Before signing any agreement with a credit card processor, read it thoroughly. Look out for hidden fees, early termination charges, or other potential costs.
- Regularly Review Statements: Ensure that the rates you’re charged match what’s in your contract. If there are discrepancies, raise them with your processor.
- Stay Informed on Industry Changes: The world of credit card processing is ever-evolving. Keeping abreast of changes can help you spot opportunities or challenges early on.
- Consider Alternatives: While major credit cards are popular, consider offering alternatives like digital wallets, direct bank transfers, or even cryptocurrencies. Some of these might come with lower fees.
For Consumers
- Educate Yourself on Card Fees: Some premium credit cards charge merchants higher fees. Knowing this can make you a more informed consumer, especially when shopping at small businesses.
- Use Cash Where Possible: Small businesses especially benefit when you use cash for smaller transactions, as it can help them avoid processing fees.
- Inquire About Discounts: Some merchants offer discounts for cash payments, direct bank transfers, or using a payment method that incurs lower fees.
- Understand Your Card’s Benefits: While some cards may have higher fees for merchants, they might also offer you benefits like cashback, points, or protection on your purchases.
- Stay Alert to Scams: With the increasing number of digital payment methods, scams have become more prevalent. Always double-check payment links, keep your cards secure, and regularly check your statements for unauthorized transactions.
In the evolving landscape of financial transactions, staying informed and vigilant benefits everyone. Whether you’re a merchant looking to maximize profits or a consumer wanting the best bang for your buck, understanding the intricacies of card transactions can go a long way.
Should I Hire a Lawyer?
Taking on giant corporations can seem like a David versus Goliath battle. Navigating the intricate web of antitrust laws, understanding the nuances of your case, and ensuring you have the best shot at a favorable outcome requires legal aid. Here’s why considering legal assistance is crucial:
- Understanding the Law: Antitrust laws are complex and continuously evolving. A seasoned business lawyer will have an up-to-date understanding and can explain the law in simple terms, helping you make sense of where you stand.
- Evidence Gathering: Building a strong case requires substantial evidence. Lawyers know what evidence is relevant, how to source it, and how to present it most effectively in court.
- Negotiation Skills: Often, large corporations prefer settling such cases out of court. Having a lawyer on your side ensures you have a seasoned negotiator to get the best possible terms.
- Resource Access: Law firms usually have a team of paralegals, researchers, and other professionals who can assist in building a strong case. Their collective experience can prove invaluable.
- Emotional Support: Legal battles can be draining. Having a professional who can guide, advise, and reassure you throughout the process can be a significant source of relief.
- Future Precautions: Beyond just representation, lawyers can advise protecting your business against similar antitrust concerns or other potential legal pitfalls.
It’s never too early to seek legal advice. Whether you’re merely considering action or facing legal challenges, securing representation can make all the difference. With LegalMatch, finding the right business lawyer for antitrust issues has never been easier. Embark on your legal journey today, equipped with the guidance and support you deserve. Don’t leave your rights to chance; ensure you’re represented, informed, and prepared.
