Payment-Card Antitrust Settlements: What the Money Actually Covers

The payment card interchange antitrust settlement provides compensation for merchants who alleged that Visa, Mastercard and issuing banks used card fees and network rules to suppress competition. The merchant paid to accept the card, then faced rules limiting its ability to steer the customer toward a cheaper payment. If you worked on those fees or rules, you may know how the restriction reached the checkout.

The later interchange-fee settlement and the older Visa Check/MasterMoney settlement concern different claims. The older case challenged a requirement tying debit-card acceptance to credit-card acceptance. The later case challenged interchange pricing and rules that limited merchants’ ability to put pressure on those prices.

How Interchange and Merchant Discount Fees Move

Interchange is the fee retained by the bank that issued the customer’s card. The merchant discount fee includes that interchange fee and an additional amount for the merchant’s bank to process the transaction.

The customer presents a card, starting the payment chain described by the appeals court. The merchant sends the card information to its acquiring bank, which passes it through Visa or Mastercard to the issuing bank. The issuer checks that the customer has enough credit or funds and sends approval back through the same chain.

The money then follows. The issuing bank sends funds through the network to the acquiring bank, keeping the interchange fee. The acquiring bank pays the merchant after charging the merchant discount fee. Although the banks can agree on an interchange rate, each network sets a default rate when they have no agreement. The applicable default varies with factors including the type of card.

That is why the fee and the acceptance rule belong in the same story. The opinion describes an Honor All Cards rule requiring a merchant that accepted a brand’s credit card to accept all credit cards of that brand, despite different interchange costs. It also describes anti-steering rules, including restrictions on surcharges and discounts, that prevented merchants from encouraging a cheaper card or cash.

The merchants alleged that these rules and practices worked together to produce fees above competitive levels. Their complaint concerned both the price of accepting payment and restrictions on what they could do about it. A network employee might know how a rule was written. A merchant’s payments team might know what that rule prevented at the register.

The Visa Check/MasterMoney Settlement

The Visa Check/MasterMoney settlement resolved an earlier challenge to the networks’ card-acceptance requirements. The merchants’ complaint went to a basic commercial choice: which products they would agree to accept.

What Is an Unlawful Tying Arrangement?

The tying arrangement merchants challenged made acceptance of the networks’ credit cards conditional on accepting their debit products too. The Honor All Cards requirement connected products that a merchant could want to evaluate separately. The merchants alleged that this connection restricted their choice.

The settlement changed the challenged acceptance rules and provided cash compensation and temporary fee relief.

The Cash Obligations and the Fee-Relief Estimate

Under the agreements, Visa’s cash obligation was $2,025,000,000, while Mastercard’s cash obligation was $1,025,000,000.

The court’s approval opinion identified the combined cash fund as $3.05 billion. It separately described approximately $846 million in estimated temporary interchange-rate reductions. The deal addressed both past harm and the cost of accepting cards afterward.

The Later Payment Card Interchange Settlement

The later payment card interchange settlement addressed merchants’ allegations about interchange pricing and network rules. The district court approved the monetary settlement on December 13, 2019, after an earlier combined cash-and-rule settlement had been overturned.

That earlier agreement put merchants seeking money for past harm alongside merchants seeking changes to future network rules. The appeals court reversed approval because the same representatives handled both groups despite conflicting interests: more cash for past transactions could come at the expense of stronger restrictions on the networks’ future conduct.

The new arrangement separated representation for the monetary claims from representation for the proposed rule changes. It addressed who was negotiating for past losses and who was negotiating over the cost of accepting cards afterward.

The Opt-Out Reduction Came Before the Fee Deductions

The court described the later fund as approximately $5.6 billion after a $700 million reduction for merchants that opted out. For perspective, the opinion noted that the settlement was smaller than the interchange fees Wal-Mart Stores alone had paid in a single decade.

The district court awarded approximately $523 million from the fund in legal fees, with $39 million in expenses.

The Merchant’s Share Followed Its Transactions

The settlement allocated shares according to the interchange fees attributable to a merchant’s covered transactions. It did not divide the fund equally among businesses. A business’s card activity therefore mattered to its share in a way that a headline count of merchants could never show.

When the Oil Company and the Service Station Claimed the Same Fees

The payment-card case exposed a concrete disagreement over who had paid the challenged fee. Oil companies and their branded service stations both claimed they had accepted cards for the same gasoline sales.

The stations pointed to taking customers’ payments for gasoline. The oil companies pointed to operating and processing services they supplied for those transactions. The court’s discussion of the dispute focused on who actually paid the fee.

That is an industry problem hidden inside a familiar phrase, accepting a card. The business dealing with the customer and the business handling the processing can each describe itself that way. Their respective roles in the transaction explain why the settlement needed more than a list of storefronts.

For an insider, that is also where commercial knowledge earns its value. Someone who understands the processing arrangement can explain who handled the payment and how the challenged charge reached the business. The fee has a path through the transaction, even when the parties disagree about whose loss it represents.

What an Insider Knows About the Card Rules

An insider’s account of how fees or restrictions were agreed, communicated or implemented concerns the conduct behind the charges. Knowledge from inside a network, bank or merchant operation can give us something to investigate beyond the amount on a merchant’s statement.

How Much of a Settlement Does a Whistleblower Get?

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. The payment-card settlements discussed here compensate merchants through private class funds.

If you know how a fee or restriction was agreed, we assess that evidence with you and identify the whistleblower case it can support. Where government payments are involved, we examine how the conduct reached those payments.

You Know How the Fee Reached the Merchant

Tell our whistleblower experts who set the card fee or acceptance rule and how it changed the merchant’s choices at checkout.