Visa, Mastercard Agree To Pay $197m To Settle ATM Class Action

June 3, 2024
Visa and Mastercard have agreed to pay $197m to settle a “longstanding” and “hard-fought” class action alleging antitrust violations by the two card networks.

Visa and Mastercard have agreed to pay $197m to settle a “longstanding” and “hard-fought” class action alleging antitrust violations by the two card networks.

On Wednesday (May 29), lawyers representing the plaintiffs published details of the proposed settlement, which requires court approval in order to be enacted.

If the proposal goes ahead, Visa will pay approximately $104m and Mastercard will pay approximately $93m into a settlement fund, which will be disbursed to class members after deductions for attorney fees, litigation costs and other expenses.

However, the settlement class is estimated to number “at least” 175m members, meaning that individual payouts to class members will be negligible.

Moreover, the three law firms representing the plaintiffs plan to request up to 33 percent of the settlement fund as fees, plus other costs.

The plaintiffs’ counsel said that this request is “reasonable” in light of other complex antitrust class actions.

If the settlement is approved and no appeals are filed, payouts are expected to begin within six months.

Over a decade of litigation

The lawsuit was originally filed in 2011 and was brought on behalf of all cardholders who have paid access fees, also known as surcharges, when making “foreign” ATM transactions.

In this case, “foreign” refers to the use of an ATM that is owned by a bank other than the one that issued the card used to withdraw.

Visa and Mastercard are alleged to have “colluded” with major US banks and other institutions to increase ATM access fees paid by consumers.

As alleged, this was achieved through a strategy of acquisitions, “duality” agreements and by restricting ATMs from offering discounts for transactions via other networks.

The plaintiffs claim that this “horizontal price-fixing” strategy originates from Visa and Mastercard’s earlier statuses as associations of member banks, which in turn owned “virtually all” of the ATMs in the US.

“The purpose behind the restraints was to relieve banks of the rigours of competition, and to thwart price competition from independent ATMs, after ATM access fees were first permitted in 1996,” the plaintiffs said.

“In this way, banks were assured that their MasterCard customers would not have to pay more in fees than their Visa cardholders, and they would not face competition at the network level.

“Visa and MasterCard exploited their position as nationwide networks to collect more fees, pay ATMs less in net interchange to process transactions, and contain the growth of rival ATM networks.”

Both Visa and Mastercard have denied the allegations, but the court is yet to adjudicate on which party is in the right. A settlement was therefore necessary to prevent the case from going to trial — an outcome that Visa and Mastercard appear keen to avoid.

An “excellent” settlement?

Eric Schachter, an attorney representing the plaintiffs, wrote that the settlement represents an “excellent result” for the settlement class.

The $197m payout to which Visa and Mastercard have agreed represents between 17 and 28 percent of the damages that the plaintiffs could have secured if they prevailed during trial, he said.

“This is an exceptional rate of recovery, particularly for antitrust class actions,” said Schachter. “Were this case to proceed to trial, the settlement class could receive substantially less, or even nothing, despite more than a decade of litigation.

"The settlement, by contrast, will deliver immediate and assured relief.”

Since 2011, when the lawsuit was filed, the plaintiffs have obtained more than 800,000 documents from the defendants and 19 third parties.

The plaintiffs also obtained 3TB of transactional data, which took several years and cost millions of dollars to analyse.

The original lawsuit also named Bank of America, Wells Fargo and J.P. Morgan Chase as defendants.

A settlement between the plaintiffs and the so-called “bank defendants” was approved by court order in August 2022, and led to a payout of $66m to class members.

When combined with the proposed Visa and Mastercard settlement, the total settlement fund comes to approximately $264m.

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