A federal judge has approved the multi-billion dollar settlement of a lawsuit over credit card swipe fees, resolving an eight-year long battle between banks and retailers.

In a 55-page ruling, U.S. District Judge John Gleeson said the settlement will encourage competition.

He also sharply criticized the tactics and arguments of some of the nation’s largest retailers, many of whom tried to torpedo the deal.

“The vitriol and poor behavior and feigned hysteria mask complex and difficult issues on which reasonable merchants can and do disagree,” Gleeson wrote.

The antitrust case was brought in 2005 by a small group of retailers who objected to the pricing set by Visa, MasterCard and the banks that issue their cards.

Much has changed in the eight years since the suit was filed, as the judge noted—in particular, Visa and MasterCard, which used to be owned by a consortium of banks, have become publicly traded companies.

The settlement deal, struck last year, calls for the defendants to pay an estimated $7.25 billion, though that number fell because many merchants opted out of the agreement. The settlement is now valued at $5.7 billion.

Under the deal, Visa and MasterCard also agreed to allow retailers to impose surcharges on credit-card purchases.

Merchants that opposed the deal included many of the nation’s largest retailers.

One of the leading retail trade groups noted that the settlement’s terms do not affect how swipe fee pricing will be set in the future.

“We are very disappointed that this deeply flawed settlement has been approved,” Mallory Duncan, general counsel for the National Retail Federation, says in a news release. “It is not supported by the retail industry and would do nothing to reduce swipe fees or keep them from rising in the future.”

Judge Gleeson wrote that the dissenting retailers were asking for too much, given the limits of what lawsuits can accomplish.

“Even if the objectors are right in contending that additional dominoesmust fall before the alleged anticompetitive behavior of Visa and MasterCard is eradicated, those dominoes will have to fall in other forums,” Gleeson wrote.

Gleeson also touted the benefits of the new rules allowing merchants to impose surcharges.

“For the first time, merchants will be empowered to expose hidden bank fees to their customers, educate them about those fees, and use that information to influence their customers’ choices of payment methods,” Gleeson wrote.

Retailers, however, have been dismissive of the impact of those rule changes on the way they do business.

Merchants that alert their customers to the card fees may find themselves at a competitive disadvantage. That’s because other retailers will seem to absorb the fees by concealing them in the prices they charge, observers say.

Moreover, some states bar retailers from publisizing the fees, and a welter of rules can make displaying fees difficult.

The judge also seemed to signal exasperation with the length of the legal saga, noting that more than 400 depositions were taken and more than 80 million pages of documents were exchanged as part of the discovery process. n

Subscribe Now

Authoritative analysis and perspective for every segment of the payments industry

14-Day Free Trial

Authoritative analysis and perspective for every segment of the industry