The National Retail Federation has welcomed the settlements reached with Visa and MasterCard this week in a federal antitrust lawsuit brought by U.S. merchants against the two companies regarding their debit card practices.
The settlements came in a lawsuit filed against Visa and MasterCard in 1996 by NRF and about 20 of the nation’s largest retailers. The lawsuit alleged that the companies “honor all cards” practice of requiring retailers who accept their credit cards to also accept their “Visa Check” and “Master Money” debit cards was a violation of federal anti-trust law. Merchants objected to the cards because they carry higher transaction fees than independent bank debit cards when a consumer signs for a transaction rather than using a PIN number. In addition to the named plaintiffs, the lawsuit was a class action representing anyone who had accepted Visa or MasterCard debit cards since October 1992, or approximately 5 million large and small retailers.
“We have been through more than six years of long and arduous litigation with two companies that are among retailers biggest business partners, companies with whom we want to be friends, not adversaries,” NRF Senior Vice President and General Counsel Mallory Duncan said. “These settlements bring that lawsuit to a close and will allow retailers, Visa and MasterCard to return to working together in a truly competitive environment to serve the needs of the American consumer.”
“Consumers will still be able to use their debit cards and they will still be able to choose between punching in a PIN number or signing for their purchases,” Duncan said. “The difference now is that retailers will pay much lower transaction fees. That’s a victory for both retailers and consumers because high fees have driven up the price of every product sold. Visa and MasterCard have charged merchants more than $1 extra on every $100 spent whenever a debit card user signs for a purchase. This settlement will eliminate that extra charge and save American consumers billions of dollars.”
Under the current system, merchants pay a flat fee of between 10 and 15 cents when a customer uses a PIN on a debit card transaction, but are forced by Visa and MasterCard to pay a percentage of the sale – usually between 1.5 and 2 percent – when the customer signs a sales slip instead.
Under settlements reached with Visa and MasterCard this week, the fees for signature transactions will be substantially reduced between now and January 1, 2004. In addition, merchants will no longer be required to accept Visa or MasterCard debit cards unless they choose to do so, although most are expected to continue to accept the cards at competitive prices negotiated between the two card companies and the retailers. The MasterCard settlement includes damages of approximately $1 billion while the Visa settlement includes damages of approximately $2 billion. The damages will be divided among the retailers represented in the suit, based on a percentage of the debit card transactions they have conducted.
