The historic antitrust settlement for U.S. merchants, where a lawsuit was initiated in 2005 against Visa and Mastercard claiming that the companies conspired to impose high interchange fees on merchants and alleging that they enforced rules restricting merchants from promoting cheaper payment options to customers, has finally provided relief after 15 years. The total settlement amount is determined to be around $5.5 billion. The case also highlighted the concerns about fair competition and pricing practices in the payment processing industry.
The Court extended the claims-filing deadline to February 4, 2025. The Administrator mailed additional claim forms until the end of October 2024. The order was initially issued on August 8, 2024. The class Administrator has already mailed additional claim forms at the end of October 2024. The business owners were also allowed to submit claims to receive their share.
About the Legal Action and the Lawsuit
The lawsuit dealt with merchants’ interchange costs while accepting Visa or Mastercard from January 1, 2004, to January 25, 2019.
Plaintiffs have alleged that Visa and Mastercard, with the help of their member financial institutions, violated statutes about these interchange costs. They both operated against merchants with various rules that prohibited them from promoting alternative payment methods for their goods, consisting of no-surcharging and no-discounting rules. These rules were allegedly to stifle competition for Visa and Mastercard in order to sustain levels as high as the established interchange. Also, there were allegations that both Visa and Mastercard had unlawfully collaborated concerning specific business practices. Having changed the companies to registered publicly traded corporations years ago, Mastercard and Visa supposedly retained those old practices. The produce price graduates suffered in their business activities from the defendants’ imputable excessive interchange fees claimed. According to the defendants, the practices in litigation are legal, competitive, and beneficial to merchants and consumers.
What About the Interchange Fee?
Interchange fees are imposed on card payments made with either credit or debit cards. Generally ranging between 1% and 2% of the purchase amount, interchange fees form an essential part of the total costs incurred by merchants to accept Visa and Mastercard payments. Visa and Mastercard calculate interchange percentage payments based on the transaction processed. Additionally, fee schedules are usually updated to be made available on the respective websites approximately on a biannual basis.
The Reason for the Settlement
The Court has not determined any of the legal issues in the case or whether either party broke the law. Both parties agreed to settle possible liability rather than incur the inconsistencies and expenses given in potential risk at trial and possible appeals. Extensive negotiations, including mediation by two experienced mediators, led to this settlement. Under this settlement, qualifying class members will receive payment. Rule 23(b)(3) Class Plaintiffs and their Counsel believed the settlement was in the best interests of all class members. The action took thirteen years of litigation torture before it agreed on a settlement. During discovery, plaintiffs reviewed more than 60 million pages of documents and took over 550 depositions. Numerous motions, including motions to dismiss and for class certification, were fully briefed and argued by several attorneys on both sides, but the Court declined to rule on each of them.
Parties Involved in the Class Suit?
The lawsuit involves all entities in the U.S. that accepted Visa and Mastercard cards during the specified period. It was a class-action lawsuit, meaning it represents a group of affected parties. Some businesses, including certain universities, withdrew from the lawsuit and were labeled as “Dismissed Plaintiffs,” and they were not included in the Settlement Class.
Who Are the Dismissed Plaintiffs?
Dismissed Plaintiffs were the individuals who settled and dismissed their lawsuit against Visa, Mastercard, and related entities.
Eligibility of Claiming Shares
If a business accepted Visa and/or Mastercard between January 1, 2004, and January 25, 2019, it can claim its share of the settlement. Businesses that have closed or filed for bankruptcy can also get relief for their overpayments that occurred during the 15-year class period by filing a claim.
What Is the Class Period?
Keeping the old merchant statements handy might be needed for filing a claim, and if they don’t have the statements, it’s nothing to worry about, and they can still file for the claim. Contact their payment processor for assistance in obtaining statements or estimating interchange fees, as all merchant accounts were eligible, no matter how many processors they used during the specified period. Reaching out to their current or former processors without hesitating for any extra documents might help the merchants in the claiming process. As the merchants or the ones seeking the claim are likely not alone in seeking help, so they should expect others to be in the same boat.
Why Did the Merchants Receive a Notice?
The Notice outlines the rights of the merchants or those seeking to claim along with options in a class action lawsuit in the U.S. District Court for the Eastern District of New York. Judges Margo K. Brodie and James Orenstein are the ones who are overseeing the case titled In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, MDL No. 1720 (MKB) (JO).
The lawsuit involved merchants, with specific plaintiffs authorized to represent all merchants in the class for the proposed settlement. This has been emphasized in Rule 23(b)(3) where Class Plaintiffs included several companies like Photos Etc. Corporation and Payless Inc. The defendants in the case are major payment networks, specifically Visa and Mastercard. The notice provided the details of the lawsuit, along with the proposed settlement, the benefits available to them, the eligibility criteria, and how to claim those benefits.
How to Submit a Claim?
To submit a claim, finding the claim form is the beginning, which the administrator sent through mail between December 1, 2023, and hitherto. The claim form indicates the membership in the Settlement Class and includes a 10-character Claimant ID and a 6-digit Control Number, and these identifiers were located near the bottom of the claim form. The merchant or the business person who wants to file for a claim must procure the Claimant ID, Control Number, and supporting documents like merchant statements to complete the claim. In case a merchant or a person in need of claiming has not received a claim form, they can, through the following, get help from their problem.
Firstly, through ensuring that they are not on the Dismissed Plaintiff list. Then they can verify with the General Council Office and C-Suite offices if they received the form. Subsequently, they can continue searching and ask others, especially in merchant departments, if they have it. And lastly, by reaching out to the contact number listed on the official website for assistance.
How Does a Merchant Submit for the Claim?
Eligible merchants need to file a claim by August 30, 2024, either online or by mail. To claim, businesses should visit the merchant portal and enter their control number and claimant ID from the original claim letters, and if the claim letter was not received or was lost, they can check their eligibility on the portal using their Tax Identification Number (TIN). It is also required to submit proof of TIN with supporting documents when the merchant is in the process of creating an account on the portal.
The Claim Process is Quite Easy
This settlement is significant. Sometimes, the mail may look like a scam, but it is actually entirely accurate, and claiming a share is relatively simple.
Submitting a claim can take as little as five minutes, either online or by mail. The claim forms will be mailed to business owners starting December 1 and throughout December; they are also available online. The quickest way to submit a claim is by scanning the unique QR code on the claim form; the QR code leads to a secure claim portal with prefilled information, including interchange fees if data is available. Along with that, the settlement administrator and Class Counsel provide no-cost assistance, and it’s also advised that the merchants avoid third-party filers.
The claim amounts are based on a percentage of interchange fees paid during the Class Period and other factors, including the total number of valid claims and they must be filed before the end of the claim period to receive payment. However, some class members may need to provide additional data to verify their eligible payment card transactions and interchange fees.
What About the Settlement Fee the Merchants Will Get From the Visa Mastercard?
Every merchant with an approved claim can expect to receive something, but the amount can’t be determined until all the claims are received and processed, and it could take up to 18 to 24 months or more.
The amount will also depend on each merchant’s actual or estimated Visa and Mastercard interchange fees paid between January 1, 2004, and January 25, 2019, as well as the total settlement money available, minus the settlement cost.
The court approves the cost of the Visa Mastercard class-action settlement and includes:
- Settlement administration and notice
- Taxes on the settlement fund
- Monetary awards for the services of class plaintiffs
- Attorney fees and expenses
How Much Money Will the Merchants Receive?
Claims will be paid in pro-rata shares to merchants filing valid claims after interference of fees from Visa and Mastercard transactions sustained during the Class Period. The settlement fund sum shall thereafter be subject to reductions, as enumerated:
- Exclusions of certain class merchants.
- Settlements are required to arm in striking exhibition notices.
- Taxes and reimbursements.
- The Court shall determine counsel fees and compensation.
- The total dollar value of all valid claims will also impact the distribution of funds.
The Class Administrator and Their Role in the Claiming Process
From January 1, 2004, to January 25, 2019, the Class Administrator has data to estimate interchange fees for Authorized Claimants.
This goal uses the required data to determine interchange fees for Rule 23(b)(3) Settlement Class members. And, if a class member’s interchange fees can’t be estimated or if there’s a dispute, they must provide supporting information.
The Class Administrator offers a claims website where class members can access their claim calculations using a unique code through required information, including known interchange fees, merchant discount fees, merchant category codes, business descriptions, and total transaction or sales volume. The class members review, accept, or dispute the data on their Claim Form or the website.
The Claim Form and online portal usually guide how to challenge the data.
Another Role of the Class Administrators Regarding Data
What will happen to a merchant if the class administrator doesn’t have the required data?
The Class members without financial data or identification can still file a claim using the Claim Form. Merchants must fill out and sign the Claim Form and submit it by the deadline, either by mail or online. And, if the Class Administrator lacks records of Interchange Fees paid during the Class Period, merchants must provide known or estimated amounts.
Subsequently, if the claimed Interchange Fees cannot be validated, additional documentation may be required later. Merchants unsure of their Interchange Fees can leave that section blank or indicate “I don’t know” on the form, and the Class Administrator will follow up regarding the matter.
Conclusion
The Payment Card Interchange Fee Settlement allows businesses to recover some fees from past card transactions. Following the outlined steps can help any merchant or company seeking the claim to file their claim effectively and secure the compensation their business deserves.
It should be remembered that claims must be filed by the specified deadline, and late submissions usually won’t be accepted. If there is a need for any questions or if they face challenges, reaching out to the claim’s administrator or a legal expert for help and informing the CFO, Legal Office, and merchant departments to forward all related communications to their designated contact will be beneficial. Being cautious of scams, expecting an increase in emails and sales calls from third parties regarding the $5.6 billion settlement, and steering clear of third-party services that charge fees to expedite claims is also important. It is advisable to only use the official claims portal for the legal matter of the claim.