A nearly decade-old legal battle ended with Visa and
Mastercard agreeing to pay a combined $199.5 million to settle claims by
merchants alleging they were left to bear the costs of fraudulent transactions
involving counterfeit, lost, or stolen cards. The proposed settlement was submitted to a federal
court in Brooklyn and awaits judicial approval.

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Origins of the Lawsuit: Chargebacks and Merchant Costs

Merchants originally filed the lawsuit in 2016,
accusing the payment giants of violating antitrust laws by coordinating changes
to chargeback rules. Chargebacks are reversed payments that occur when
customers dispute charges, often due to fraud.

The change in rules made merchants responsible for
these costs unless they updated their point-of-sale systems to accept
chip-enabled cards. While merchants faced higher chargeback costs, transaction
fees remained unchanged, escalating their financial burden.

The settlement specifies that Visa will pay $119.7 million, while Mastercard will contribute $79.8 million. Earlier, Discover and American
Express agreed to pay a combined $32.2 million to resolve similar claims.

None of the companies admitted wrongdoing by settling
the class action. Mastercard released a statement affirming the resolution and
reaffirming its focus on promoting technology to protect transactions at every
stage. Visa and the merchants’ attorneys did not immediately comment.

Denials of Wrongdoing and Statements

Merchant plaintiffs’ lawyers described the settlement
as an “excellent outcome for the class,” noting it equates to about 13% of
their top damages estimate and over half of a conservative benchmark suggested
by experts from Visa and Mastercard.

This settlement is separate from a larger $5 billion deal that Visa and Mastercard reached in 2019, addressing allegations of improper credit and debit card fee fixing.

This article provides financial and legal insight
relevant to merchants and payment industry watchers alike, offering context for
one of the significant ongoing antitrust settlements in the payment processing
space.

Earlier, Visa and Mastercard agreed to pay a combined $197 million to settle the class action lawsuit. In the initial settlement,
Visa was to pay $104.6 million, and Mastercard was to pay $92.8 million. Both companies denied
any wrongdoing and have not admitted liability.

This article was written by Jared Kirui at www.financemagnates.com.

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