Retailers have been paying close attention to recent developments in the MasterCard/Visa Interchange Fee litigation, and for good reason. Every year, consumers increasingly expect and demand that retailers accept credit cards for payment, and for many, interchange fees—or the “swipe fees” retailers must pay to the banks and networks for every transaction—have now become the second highest cost of doing business, trailing only employee wages. In fact, industry reports calculate that retailers pay billions of dollars annually in interchange fees.

However, an opportunity for some cash relief may be forthcoming. On January 24, 2019, the tumultuous fourteen-year Interchange Fee litigation inched one step closer to final resolution when Judge Margo Brodie granted preliminary approval of the $6.2 billion settlement between Visa and MasterCard and a class of U.S. merchants. The court also set a July 23, 2019 deadline for retailers to either opt out of the settlement or remain in the class. Retailers that remain in the class would be entitled to their pro rata share of the settlement fund, while those that opt out would have to file a lawsuit or negotiate a settlement directly with the defendants. More information about the settlement can be found on the court approved website and official notice under

Unlike the prior 2012 settlement vacated by the Second Circuit, many within the industry anticipate that the current settlement will be approved this time around. If affirmed, the $6.2 billion settlement would constitute the largest antitrust settlement in U.S. history, making the upcoming July 23 opt-out deadline all the more important for retailers to mark on their calendars. This post provides: (1) a summary background of the Interchange Fee litigation; and (2) an overview of the pathways to recovery that retailers should evaluate in advance of the July 23 deadline.

The Interchange Fee Litigation

In 2005, merchants brought suit against Visa, MasterCard, and their member banks, alleging that the defendants violated antitrust law by conspiring to fix interchange fees and uniformly adopting anticompetitive rules, including anti-steering and “honor all cards” rules that prevent merchants from steering customers towards lower-cost payment methods and from negotiating lower interchange rates with the issuing banks.

The U.S. Department of Justice launched its own investigation into Visa and MasterCard’s anticompetitive conduct. This investigation resulted in a settlement with the government in 2010 which required the card networks to modify or eliminate various rules.

In 2012, the class reached a $7.25 billion deal with the card networks in exchange for a perpetual release of all future claims relating to the merchant rules at issue. Following numerous objections by retailers and other merchants across the nation that balked at the release, the Second Circuit in 2016 vacated the settlement on appeal.

On remand, the parties continued to litigate until late 2018, when the defendants reached the current $6.2 billion settlement. Meanwhile, retail industry groups such as the National Retail Federation continue to closely monitor the ongoing litigation with a separate class of merchants seeking injunctive relief to verify whether Visa and MasterCard will reform their rules. While the cash settlement will likely be appealed again, most observers believe that the likelihood of approval is higher now because the perpetual release from the prior settlement has been replaced with a more limited 5-year release of claims.

The Pathways to Recovery

As the July 23 opt-out deadline approaches, there are many considerations that retailers should weigh when deciding how to proceed. The right decision will, of course, be individualized to each retailer. Outside legal counsel can help retailers engage in a cost-benefit analysis and assessment of each option, including expected recoveries and potential timeframes for relief. The various pathways to recovery include, but are not limited to:

  • Remaining in the Class. Retailers may elect to remain in the class and file a claim as a member of the class settlement. This option requires the least amount of work and can be more appealing than pursuing direct action against the networks for retailers with small claims or few resources. However, a recovery through the class settlement may be smaller compared to the other options available, and retailers would likely be forced to wait a minimum of 2–3 years before a payout is realized due to the size and complexity of the claims administration process. Furthermore, there is a risk that the settlement is either rejected by the courts or voluntarily terminated by the defendants if the number of opt outs crosses a certain threshold.
  • Opt-Out Litigation. On the other hand, retailers that choose to opt out of the class and pursue litigation could potentially realize a recovery that is greater than what the class has achieved on its claims. As is true with all litigation, there is also a risk of no recovery for retailers that opt out. Litigation, however, provides retailers the best opportunity to maximize the full value of their claims and to negotiate for non-cash benefits and favorable business terms, such as a reduction in fee rates locked in for a number of years or a modification of merchant rules to allow for steering or surcharging for certain transactions. Hundreds of merchants have already litigated their claims and reached settlements, and many other retailers continue to litigate their claims. While litigation would entail higher costs and engaging in discovery, retailers may be able to share legal costs on a pro rata basis by jointly litigating the case as part of a larger merchant group, which would also provide additional benefits including increased leverage and cover.
  • Settlement Negotiations. Retailers with large claims may also consider engaging in settlement negotiations directly with the card companies before the close of the July 23 opt-out deadline. An independently negotiated settlement could be larger than—and pay out earlier than—a recovery obtained through the class. Retailers with smaller claims may find it helpful to engage the card companies as part of a merchant group in order to leverage aggregate transaction volume.
  • Sale of Claim. If increasing cash flow in the short term is a priority, retailers may want to consider monetization through a sale and assignment of their claims. A market for these claims has been increasingly developing since the parties have reached their current class settlement, and a number of third-party funders are now making offers in the range of 60–80 cents on the dollar. Retailers interested in selling their claims should be sure to solicit multiple bids from different funders before accepting a final offer.
  • Related Cases in Other Jurisdictions. Retailers with business operations outside of the U.S. should also track recovery opportunities that may present abroad. For instance, various Canadian courts in 2018 have approved settlements totaling CAD $45 million. Meanwhile, in Europe, the London Court of Appeal recently permitted a consumer class action lawsuit against MasterCard to proceed, and another related key case involving a group of U.K. supermarkets is set to be heard at the British Supreme Court. While opt-out deadlines have not yet been set in these cases, retailers that accept credit cards internationally should monitor developments arising from these important jurisdictions.

In light of the potential recovery and multiple opportunities at stake in this space, it is important for retailers to strategically evaluate their options and select a pathway to recovery that aligns with and will further the business objectives of each individual retailer.