Visa Inc. and Mastercard Inc. are close to settling a long-running antitrust lawsuit with merchants. Visa, Mastercard and a number of banks that issue debit and credit cards – JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp. – would be required to pay merchants around $6.5 billion. It is still unclear how this payment will be split up among these networks and banks.
According to those familiar with the situation, the lawsuit will actually leave Visa and Mastercard better off than before. But how can being on the paying end of a multi-dollar settlement be viewed as a positive outcome? Visa and Mastercard are worried about more than money.
This lawsuit originated in 2005. It was alleged that networks had colluded when raising swipe and other transaction fees. Many large merchants chose to opt out of the original settlement ($7.25 billion) because the terms would prevent them from filing lawsuits against the networks over future swipe-fee increases. This settlement was then invalidated by an appeals court, which stated that merchants were not adequately represented.
Merchants that agree to this settlement will be restricted for a number of years; the terms do not allow them to suing card networks over the same card-swipe-fee claims the suit addressed. Those who choose to opt out are able to bring their own lawsuits against the networks. Large networks like Home Depot Inc. and Amazon.com Inc. have chosen to do so.
This case has been incredibly contentious for merchants. They have stood firm in their allegations that card networks are setting fees and card acceptance rules that benefit the banks. Merchants want to be able to negotiate the fees directly with the banks, but card industry executives are adamant that without their systems merchant sales would slow significantly.
For business owners, you should know that, if the Visa and Mastercard settlement does take place, it will not have an impact on the broader payments landscape. Do you have trouble finding payment processing to begin with? Many merchants find themselves unable to secure a merchant account to accept their customers’ payments.
If you are one of the many business types or industries deemed “high risk”, consider what a high risk merchant account can do for your business. Secure an affordable, flexible option that allows your business offer multiple payment options.
Author Bio:Electronic payments expert Blair Thomas co-founded eMerchantBroker, serving both traditional and high-risk merchants through services like a high-risk merchant. His passions include producing music and traveling.