Visa Inc. and MasterCard Inc. are asking a judge to put to rest antitrust allegations that have plagued the companies for years over fees that are paid by U.S. merchants to support the credit card networks.
U.S. District Judge John Gleeson in New York City heard arguments last week over whether to grant final approval to a multibillion-dollar class action settlement on behalf of merchants nationwide.
Opposed by scores of big-box retailers and other consumer businesses, the accord is aimed at ending future court battles with U.S. merchants over the practice of setting credit card interchange payments, known as swipe fees.
"They're seeing this settlement as finally buying them some peace," said Steven Semeraro, a former U.S. Justice Department lawyer who isn't involved in the case. "And that's worth it to them, however many billions of dollars it's going to cost."
Developed by banks half a century ago, Visa and MasterCard have been subject to government scrutiny over their business practices for decades, Georgetown University law professor Adam Levitin wrote in a 2008 report on credit card merchant restraints.
The card firms faced an antitrust suit filed by Wal-Mart Stores Inc. and other retailers in 1996 and actions by the Justice Department, leading to changes in some of their rules.
Bank-owned groups spun off the card companies through initial public offerings in 2006 and 2008 in a move that merchants alleged was intended to dodge antitrust liability.
Not long after California-based Visa and New York-based MasterCard received final approval for their previous settlement of more than $4 billion in January 2004, the current case was brought against them in October 2005.
The firms thought they would be protected from future antitrust lawsuits over interchange fees by releases written into the settlement of the earlier Walm-Mart-led case, said Mr. Semeraro, now a professor at the Thomas Jefferson School of Law in San Diego.
This time, the card companies "think they really have the language in there" and included an "unbelievably broad" release, he said.
"It prohibits virtually anyone except an antitrust enforcement authority from ever suing them again for anything that relates to antitrust claims," he said.
Estimated to be the largest settlement ever in a U.S. antitrust case, the settlement is currently valued at about $5.7 billion. In an August report, a court-appointed expert said plaintiffs might have difficulty establishing that the companies violated antitrust laws at trial and are probably better off with the accord.
Merchants are expected to receive about one-third of a year's worth of interchange payments if final approval is granted and the order isn't delayed by an appeal. That estimate is based on assumptions about the number of merchants that will file claims and other factors.
Visa and MasterCard forged ahead with the settlement despite objections from hundreds of retailers, including Wal-Mart and Target Corp., which contended that the releases would cover too many of the firms' policies and allow them to raise rates in the future.
In a conference call with investors this July, MasterCard president and chief executive officer Ajay Banga disclosed that the companies decided not to back out of the accord even though a termination provision had been triggered by the volume of merchants that dropped out. Some of those merchants have chosen to file their own lawsuits.
The settlement will help the card companies rid themselves of a "gigantic nightmare" in terms of legal fees and other costs, said Sarah Jane Hughes, a professor at Indiana University Bloomington's Maurer School of Law, who isn't involved in the litigation.
MasterCard said it's confident the court will grant final approval.
"The scope of the release is reasonable and logical," Noah Hanft, the company's general counsel, said in a phone interview.
Paul Cohen, a Visa spokesman, declined to comment about last week's hearing.
In a joint court filing in April, lawyers for the card companies and major U.S. banks said the release "covers only claims based on continued rules and practices that are the same as, or substantially similar to, those currently in place or modified by the settlement, which courts have held a class may properly release."
Interchange fees are collected by Visa and MasterCard and turned over to banks, which use the funds to help cover the costs of issuing cards.