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Visa, MasterCard to pay $6 billion to settle retailers’ lawsuit

14 July 2012 11:01 (UTC +04:00)

Baku. Ali Ahmadov â€“ APA-Economics. Visa Inc. and MasterCard 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.
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.
The effect on consumers, especially in California, is less clear.
Some analysts worried that the settlement could lead to higher costs for millions of Americans.
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.
California law prohibits so-called credit-card surcharges, but analysts worried that retailers would raise prices across the board to avoid getting stuck with the card fees.
"It’s a terrible thing for consumers," said Linda Sherry, a spokeswoman for the advocacy group Consumer Action. "It will make it very hard for consumers to know whether merchants are simply passing along their credit-card costs or whether they’re using this as a new profit center."
Other experts said the settlement could benefit consumers by reshaping the way Americans pay for goods and services.
It could create a two-tiered pricing system in which merchants try to attract customers by offering one price to those who pay with credit cards but a slightly discounted price for cash payments. California has long allowed merchants to offer cash discounts. Many gas stations offer such a discount, and some believe it could catch on in other sectors.
Merchants may use any savings they reap to reduce prices in hope of attracting customers who have slashed their spending in the troubled economy.
One of the first plaintiffs in the class-action lawsuit was Mitch Goldstone, who owns Irvine photography shop ScanMyPhotos.com. Such corporate giants as supermarket operator Kroger Co., drugstore chain Rite-Aid Corp. and Payless ShoeSource joined later.