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Visa and Mastercard have announced that they will pay retailers more than $6 billion to settle several class-action and individual lawsuits retailers have filed since 2005.
According to a Wall Street Journal story from earlier this month, the settlement stems from complaints that Visa and MasterCard, the largest card-payments networks in the world, prohibited retailers from imposing surcharges to customers using those credit cards.
In a stament, the law firm representing the merchants said the settlement " is believed to be the largest ever settlement of a private antitrust case under the Sherman Act."
"Our decision to settle is based on our belief that MasterCard and our stakeholders are best served by an amicable resolution," Noah Hanft, MasterCard's General Counsel and Chief Franchise Integrity Officer, said in a statement announcing the settlement. "Although we have strong defenses to all claims, a settlement avoids years of litigation and uncertainties that are inherent in such cases. We believe that today's settlements should resolve all issues with the merchant community."
According to a press release from Visa, the settlement modifies "Visa's rules to permit retailers to impose a surcharge on credit transactions subject to a cap and a level playing field with other general purpose card competitors."
Those changes, says Visa, are scheduled to take effect in early 2013.
MasterCard says that as part of the agreement "merchants have agreed to provide consumers with disclosures and limit the level and circumstances in which they may impose checkout fees on a cardholder which are designed to avoid unfair, unexpected or exorbitant fees."
Update at 9:28 p.m. ET. Not All States Affected:
The Consumerist website reports that because 10 states prohibit credit card surcharges altogether, they won't be affected by the agreement. The states are New York, California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, Oklahoma and Texas.
Update at 7:31 p.m. ET. Settlement Doesn't Solve Problems:
Vermont Rep. Peter Welch, who has led the effort on credit and debit card swipe fee reform, said in a written statement that this settlement doesn't go far enough.
"This proposed settlement does not solve the problem of excessive fees or the opaque business practices of these financial institutions, but it is a step in the right direction," Welch said. "And it should send an unambiguous message to big banks and credit card companies: Stop ripping off your customers with excessive fees."
"No one would begrudge them for charging fair and transparent fees for the convenience of credit card services. But greed took over and they now have their hands deep in the pockets of merchants and consumers. In the aftermath of this lawsuit, they should take a step back and change their business model. Failing to do so will be a costly mistake."
Update at 5:53 p.m. ET. The Total Settlement:
The math on the deal seems to fluctuating a bit. Visa says the deal amounts to "approximately $6.6 billion."
But the law firm representing the merchants say the cash component of the deal is $6.05 billion and $1.2 billion in a temporary reduction of fees.
Update at 5:47 p.m. ET. 'Wide-Ranging Implications':
In its first write-through, The Wall Street Journal says this settlement will impact most Americans who use credit cards. They write:
"The settlement is expected to have wide-ranging implications for consumers, retailers and the card industry. It is also the latest victory for merchants, who have recently logged some significant wins in their efforts to reduce their cost of accepting plastic."