YEREVAN , July 14, /ARKA/. Visa Inc.andMasterCard Inc. agreed late Friday to pay retailers $6 billion to settle a price-fixing lawsuit that alleged they overcharged companies billions of dollars in credit-card transaction fees, AP reported.
The agreement is believed to be the largest settlement ever of a private antitrust case, according to lawyers for 7 million American merchants who sued the card companies in 2005. The total value of the agreement is $7.25 billion, counting a temporary reduction in card fees.
The deal is a big victory for retailers, which have long chafed at having to pay “swipe” fees of 2% or more every time a consumer uses a credit card to buy anything from a pair of flip-flops to a pickup truck.
Visa and MasterCard agreed for the first time to allow merchants to pass along credit-card charges to consumers instead of having to shoulder them themselves. That could eliminate any incentive for merchants to give discounts to buyers who pay in cash.
The dispute involves the processing charges, also known as interchange or swipe fees, that merchants pay when they process credit-card purchases, generating more than $40 billion a year for banks. The price-fixing lawsuit, filed in 2005, alleged that Visa and MasterCard conspired to raise the fees to benefit themselves and the banks.
Swipe fees have stirred enormous controversy, with critics saying the card companies and major banks vastly overcharge for what is essentially a routine and low-cost computerized transaction.
In a survey of 1,514 consumers released this week by Morgan Stanley, 76% said they were likely to switch to a debit card, cash or check rather than pay 1% to 2% extra for using a credit card, and 43% considered themselves “very likely” to do so.
The study noted, however, that many investors in card companies have been unconcerned about the prospect of surcharges, believing “that merchants would find it difficult to implement the practice given the friction and service issues it causes.” -0-
