Visa, MasterCard Settle Lawsuit with Retailers (V, MA)
Credit card companies Visa Inc. (NSYE: V) and MasterCard Incorporated (NYSE: MA), along with the banks that issue their credit cards, reached an agreement with U.S. retailers to settle a lawsuit related to the fixing of credit and debit card fees. The $7.25 billion settlement could be the largest antitrust settlement in U.S. history.
The settlement requires approval by a judge. If approved, the settlement would resolve dozens of lawsuits, which were filed by the retailers against Visa and MasterCard back in 2005. The credit card companies and the banks would also allow retailer to start charging customers extra for using certain credit cards in order to steer them toward cheaper methods of payment.
Credit card companies levy swipe fees, which are essentially charges to cover processing credit and debit payments. This fee is set by card companies, and cut from the transaction by the banks that issue the cards. As a result, the cost is passed on to the merchants.
Under the proposed settlement, Visa and MasterCard, along with more than a dozen U.S. banks who issue their cards, will make a payment of $6 billion to a class of stores. Visa and MasterCard have also agreed to lower swipe fees by the equivalent of 10 basis points for eight months for a total consideration to stores valued at approximately $1.2 billion. Meanwhile, merchants will also be allowed to negotiate collectively over the swipe fees. Another $525 million will be paid to stores that sued individually. This brings the total settlement to $7.25 billion.
Visa shares had finished 1.18% higher at $124.09 in trading on Friday. The stock has gained 22.22% so far this year.
MasterCard shares also rose on Friday, ending the day 1.26% higher at $429.60. The stock has gained 15.23% so far this year.
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Post Written By: Ed Liston
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.
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