-- Visa, MasterCard and several major banks agreed to pay $6 billion Friday to settle a lawsuit with 7 million merchants that accept Visa and MasterCard.
The deal includes a little more than $6 billion in cash for damages, of which Visa will pay $4.4 billion and MasterCard will pay $790 million. As part of the settlement, credit card companies have agreed to reduce for eight months so-called swipe fees, that businesses pay credit card companies for card transactions they process. The temporary fee reprieve is valued at $1.2 billion.
Lawyers involved in the case call it the largest antitrust settlement in history. Most major U.S. banks are defendants. The merchants include grocery chains Kroger and Safeway, the Rite Aid drugstore chain and QVC, the TV and online shopping network.
In the antitrust case, which dates to 2005, the retailers alleged the card issuers and banks conspired to fix the fees the stores paid to accept credit and debit cards, which average about 2% of the price of a purchase.
Consumers could feel effects of the settlement, too. Part of the agreement includes changes to Visa and MasterCard rules that will allow retailers to implement a surcharge for customers who pay with a credit card, which are more expensive transactions for merchants to process since they aren't subject to the caps on interchange fees imposed by the Durbin Amendmen.
The Durbin Amendment was enacted in 2010 as part of a broad financial markets overhaul and lowered the swipe fee charged to merchants when they accept debit cards from customers. It's been contentious because banks have lost revenue from not being able to charge as much for those transactions. But retailers say the fee they're charged now is still too high.
"Although we have strong defenses to all claims, a settlement avoids years of litigation and uncertainties that are inherent in such cases," said MasterCard general counsel Noah Hanft in a statement. "We believe that today's settlements should resolve all issues with the merchant community."
Not all issues, at least according to one retail organization that says the agreement may only be a temporary fix in the ongoing battle between merchants, banks and card issuers over swipe fees.
"If this is just a bunch of rule changes but they don't lead to true transparency and competition, then they're of limited value," says National Retail Federation general counsel Mallory Duncan.
Duncan explains that it would be hard for retailers to implement a surcharge on credit transactions if they don't know how much they're being charged to accept the card.
"The card companies hide the price of their cards from both merchants and consumers because they don't want either party to know how much they're being charged to use their card," he says, adding that there has to be "transparency of pricing."
Contributing: The Associated Press