V Visa Inc

By AnnaMaria Andriotis 

Visa Inc. and Mastercard Inc. are close to settling a long-running antitrust lawsuit with merchants over the fees they pay when they accept card payments, according to people familiar with the matter.

Under the settlement, Visa, Mastercard and a number of banks that issue debit and credit cards including JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp. would pay the merchants around $6.5 billion, some of the people said. It is not clear how the payment would be split up among the card networks and the issuing banks.

The parties on Tuesday informed the U.S. District Court for the Eastern District of New York that they reached a settlement, the people said. They intend to draw up a draft of the deal by mid-July and to submit a final agreement to the court by mid-August, the people added.

The case has been a highly contentious one for merchants and has raised questions about the longevity of the credit card fee model. At issue are the card swipe or interchange fees that card networks set and that merchants pay to banks when consumers use their cards to shop. Merchants allege that the networks and banks have colluded to inflate those fees.

Merchants first brought the class-action suit in 2005 against Visa, Mastercard and the largest U.S. card-issuing banks. But many large merchants opted out of the original settlement of $7.25 billion that was reached in 2012 largely due to terms that would have barred them from filing lawsuits against the networks over future swipe-fee increases. An appeals court invalidated that settlement on the grounds that merchants weren't adequately represented. The Supreme Court last year declined to hear the case, shifting it back to the district court.

Around $5 billion of the original settlement amount remained in escrow, according to people familiar with the matter, and would be distributed as part of the new settlement if it is approved by the court.

Merchants that agree to the settlement will be restricted for a number of years from suing the card networks over the same card-swipe-fee claims the suit addressed, according to people familiar with the matter. Merchants who disagree with the terms of the settlement will be able to opt out and proceed with their own lawsuits against the networks, the people said.

Several large merchants, including Home Depot Inc. and Amazon.com Inc., have filed separate lawsuits over the fees. Among the terms that the merchants are challenging are the card networks' "honor all cards" requirement. That rule prohibits merchants from selecting between a network's cards; instead merchants that accept one Visa credit card, for example, must accept all Visa credit cards. Swipe fees vary significantly between the networks' cards and are higher on cards with generous rewards programs.

Merchants were dealt a big loss this week when the Supreme Court backed American Express Co.'s policy of preventing merchants that accept AmEx cards from offering shoppers discounts or other incentives to use cheaper cards. The court's decision is a setback for the merchants' broader ambitions to take on credit card swipe fees.

Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com

(END) Dow Jones Newswires

June 28, 2018 10:01 ET (14:01 GMT)

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