Visa and MasterCard Interchange Settlement – What’s New?

As you may know, in the past several years, a number of merchants and merchant related trade groups and associations have filed lawsuits against Visa and MasterCard alleging that the current interchange structure violates antitrust laws. In July of 2011, a federal judge approved a proposed settlement between the Department of Justice, seventeen states, and Visa and MasterCard on this issue. The settlement was proposed in October of 2010 and is valued at approximately $7.25 billion. As a result of the settlement, merchants would receive consideration from Visa, MasterCard, and several major banks in the form of payments as well as reduced interchange fees over a period of 8 months. Visa and MasterCard would also update a couple of the payment associations’ current merchant policies that were outlined as a point of concern for merchants in the lawsuits. The settlement would allow merchants to now offer incentives to use a particular form of payment (e.g. a discount for using cash). In addition, merchants would now be able to provide information to customers regarding the cost of a particular type of payment (e.g. credit card payments cost a merchant more than cash) and even advocate for a payment type. Overall, the settlement would provide the merchants with more opportunity to encourage their customers to pay with a particular form of payment.
 
The Settlement – Merchant Perspective
 
Despite the agreement between DoJ and Visa and MasterCard, the merchants and merchant related trade groups and associations have expressed concern over the settlement. On September 11, 2012, the merchants indicated that they have voted to go to court over the settlement and intend to reject the settlement. Many major retailers, including Wal-Mart and Target, have spoken out against the settlement. The merchants believe that the settlement will not preclude Visa and MasterCard from continuing the increase interchange fees that the merchants will have to pay in the future in order to accept credit cards.
 
In addition to merchant concern, several members of Congress have expressed concern over the settlement. One of the most outspoken representatives to express concern is Senator Durbin, D Ill. The Senator states that the settlement was negotiated without major industry merchants being represented and that it would not resolve the issue of increasing interchange fees and collective negotiation of fees among major banks and payment associations.
 
What Does This Mean for Federal Agencies?
 
At this point in time, it is unclear as to whether the settlement that has been reached will go through or whether the merchants will reject the settlement. If the settlement is rejected by merchants, the parties will have to go back to court and continue the process of litigating the lawsuits brought against the payment associations. Agencies should continue to monitor the progress of the settlement and any continuing litigation.
 
For more information on the settlement, you can view the news articles on our website at smartpay.gsa.gov/news. We will continue to update this section of our website as we follow the settlement. In addition, click here for a copy of the settlement document.