Visa, Mastercard agree to $199.5 million settlement in merchants’ class action

By Mike Scarcella

Oct 13 (Reuters) - Visa V.N and Mastercard MA.N have agreed to pay a combined $199.5 million to settle a nearly decade-old class action that accused them of forcing merchants to swallow some of the costs of fraudulent transactions involving counterfeit, lost, or stolen cards.

A proposed settlement was filed on Friday in the federal court in Brooklyn, and requires approval from Chief U.S. District Judge Margo Brodie.

Merchants first sued the payment networks in 2016, alleging they violated antitrust law by moving in lockstep to change rules on chargebacks, which are reversed payments triggered by customer disputes. The shift exposed businesses to greater costs without any reduction in transaction fees.

Under the new framework, merchants became liable for chargebacks if they had not upgraded point-of-sale systems to accept chip-enabled cards.

Visa said it will pay $119.7 million, and Mastercard will pay $79.8 million, according to the settlement. Two other defendants, Discover and American Express, agreed earlier to pay a combined $32.2 million to resolve the merchants’ claims against them.

All four companies denied any wrongdoing in agreeing to settle the class action.

In a statement, Mastercard said it welcomed the resolution and emphasized its efforts to promote adoption of advanced technology “to protect Mastercard purchases at every step.”

Visa and attorneys for the merchants did not immediately respond to requests for comment.

In a court filing, plaintiffs’ lawyers called the deal “an excellent outcome for the class.” They said the settlement represents about 13% of the plaintiffs’ best-case damages estimate and more than 50% of a conservative benchmark provided by Visa and Mastercard’s experts.

The proposed accord is separate from the $5 billion that Visa and Mastercard agreed to pay in 2019 to resolve merchant claims that they improperly fixed credit and debit card fees.

The case is B&R Supermarket Inc et al v. Visa Inc et al, U.S. District Court, Eastern District of New York, No. 1:17-cv-02738-MKB-JAM.

For plaintiffs: George Aguilar and Michael Nicoud of Robbins; John Devine of Devine Goodman & Rasco; and Thomas Amon of Law Office of Thomas G. Amon

For Visa: Matthew Eisenstein and Robert Vizas of Arnold & Porter Kaye Scholer

For Mastercard: Kenneth Gallo and Brette Tannenbaum of Paul, Weiss, Rifkind, Wharton & Garrison

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