Understanding the Merchant Credit Card Acceptance Fee Class Action Settlement Proposal

The seven-year legal battle between merchants that accept credit cards, on one side, and Visa, MasterCard, and the largest card-issuing banks, on the other, has entered a settlement phase. Unlike settlements in standard law suits where the parties can freely agree to any terms they choose, in a class action, the court must (1) provide class members with the opportunity to object and (2) determine that the compromise “is fair, reasonable, and adequate.” Although this part of the case promises to be no less controversial than its predecessors, it should move to resolution much more quickly. By the end of 2013, the trial court is likely to decide whether to grant final approval to the settlement.This paper briefly reviews the history of antitrust attacks on the fees that merchants pay to accept credit cards, including a detailed discussion of the allegations in the complaint in In re: Payment Card and Merchant Discount Antitrust Litigation. It then explains the complicated proposed settlement in this case, working through the provisions relating to (1) damages, (2) injunctive relief, and (3) the releases from future liability that the class members would provide to the defendants. Finally, this paper analyzes the settlement's policy implications and legality, predicting that the court will not approve the b(2) mandatory injunctive relief class, but it may approve the b(3) opt out damages class. Whether that result would be acceptable to the parties on either side remains to be seen