- Key insight: The lawsuit centered on claims that card networks conspired to implement a shift in fraud liability in 2015, moving the financial burden for certain types of fraud from banks to merchants.
- Supporting data: Visa and Mastercard will pay a combined $199.5 million, joining American Express ($20M) and Discover ($12.2M) for a total settlement fund of $231.7 million.
- Forward look: Merchants who incurred specific un-reimbursed charge-backs between October 2015 and September 2017 will be notified to file a claim for a portion of the settlement.
Overview bullets generated by AI with editorial review
Payment card networks Visa, Mastercard, American Express and Discover have collectively agreed to settlements totaling $231.7 million to resolve a long-running antitrust class action lawsuit brought by U.S. merchants.
The settlements conclude years of complex litigation focusing on the industry's transition to EMV (Europay, Mastercard and Visa) chip technology.
While Amex and Discover settled in May for a combined $32.2 million, Visa and Mastercard reached a resolution last week to add just under $200 million to the settlement fund.
The core of the lawsuit: Liability shift
Plaintiffs in the class action, led by Florida retailer B&R Supermarket, filed the original complaint in March 2016, alleging violations of federal and state antitrust laws.
The merchants claimed the platforms conspired to institute an "unprecedented change in how certain chargebacks for payment card transactions were assessed," according to court records.
The merchants argued that the defendants conspired to shift "billions of dollars in liability for fraudulent, faulty and otherwise rejected consumer credit card transactions" from issuing banks to the merchants.
This policy change, known as the fraud liability shift, became effective in October 2015. Before that date, card-issuing banks generally absorbed liability for many fraudulent card transactions, particularly those involving lost, stolen or counterfeit cards.
After the liability shift, if a merchant accepted a fraudulent transaction due to failure to deploy EMV technology, they would also accept liability for the financial loss.
The lawsuit alleged that the four major networks conspired to implement the same liability shift policy using "nearly identical rules" and made the shift "effective on the same day and in the same manner for all four networks."
The merchants alleged this synchronized action was intended to harm competition by preventing merchants from steering customers toward cards offering "more lenient terms or concessions such as reduced interchange or merchant discount fees."
Even as the card networks have settled the case, the fraud liability shift policy remains in force today.
The lawsuit initially named a broad group of defendants, including the four major networks, the standards-setting joint venture EMVCo and nine card-issuing banks: Bank of America, Barclays Bank, Capital One, Chase, Citibank, PNC, USAA, U.S. Bank and Wells Fargo.
The merchants voluntarily dismissed some of their claims against the banks, and the court dismissed the rest because of vague and insufficient allegations.
Settlement structure and financial terms
In May, American Express contributed $20 million to the settlement fund, and Discover contributed $12.2 million. The two agreed to continue cooperating in the lawsuit while settlements with Visa and Mastercard were pending.
Last week, Visa agreed to pay $119.7 million, and Mastercard agreed to pay $79.8 million to the merchants in the class action. The total combined settlement fund stands at $231.7 million.
All defendants deny the legal claims and deny any wrongdoing or liability.
The class action includes merchants who incurred un-reimbursed charge-backs between October 2015 and September 2017. Class members will receive notifications when the opportunity to file a claim form opens up.
The merchants said the settlements "are in the best interests" of their fellow merchants, and the relief is "fair, reasonable and adequate" given the complexity and risks associated with continuing the litigation to trial and appeal.
