Wal-Mart Stores, Inc. (NYSE:WMT) and Target Corporation (NYSE:TGT), the two largest retailers in the United States refused to accept the $7.2 billion swipe fee settlement offered by Visa Inc (NYSE:V) and MasterCard Inc (NYSE:MA), in connection with the antitrust lawsuit filed against the two credit card companies, and other major banks in 2005.
The antitrust settlement fee includes $6 billion reimbursement for past fee overcharges, and eight-month reduction swipe fees worth $1.2 billion. Based on the proposed settlement agreement, retailers will be able to charge the credit card processing fees to consumers, which could reach as much as 3 percent of the total amount of the transaction.
The class action antitrust lawsuit represented seven million retailers, who accused the credit card companies and major banks of conspiracy in fixing credit card processing fees paid by retailers.
Target was the first retailer that expressed objection against the settlement offer, through a statement released on July 20. The company said that the proposal would only continue the broken system, restrict retailers in pursuing future legal actions, and it does not offer a long-term solution for both retailers and consumers.
Following Target’s opposition, Walmart also issued a statement, pointing out that the settlement agreement does not restrict credit card companies from constantly increasing hidden swipe fees, which cost consumers tens of billions of dollars every year. The company also emphasized, the settlement would hamper emerging payment innovations, such as payment using mobile wallets through smartphones.
Furthermore, the National Association of Convenient Stores (NACS), the independent motor fuel marketers, and chain retailers, represented by SIGMA and the National Grocers Association (NGA), also oppose the settlement agreement.
In a statement, Peter Larkin, chief executive officer of NGA, said that the organization joined the class antitrust lawsuit against the credit card network seven years ago to change the anticompetitive credit card swipe system. Larkin said the proposed settlement agreement failed to address the problem by “allowing Visa and MasterCard to continue their dominant anticompetitive practices.”
The proposed settlement agreement is subject to a judge’s approval, who will consider objections and decide whether to accept, reject, or order the parties to re-negotiate.
In a previous statement, Noah Hanft, general counsel for MasterCard, said that the company has a strong defense against the retailers’ allegations, but opted to settle the case to avoid uncertainties and years of litigation.