Visa, MasterCard Reaches $6.20bln. Settlement With Dealers

Visa, MasterCard Reaches $6.20bln. Settlement With Dealers
September 19, 2018


Visa Inc. (NYSE: V) and MasterCard (NYSE: MA), along with some of the top US banks agreed to pay up to $6.2 billion in a class action lawsuit with US dealers about Swipe fees yesterday. The settlement terminates a13-year-old litigation brought by the country’s leading wholesalers, claiming that Visa and MasterCard breached antitrust laws by setting prices in favor of banks. It’s the biggest antitrust law of all time.


Visa, MasterCard reach an agreement with dealers

The complaint was settled earlier, but the earliest settlement, reached in 2012, was brushed away as unfair by major dealers and overturned in the appeal process. Opponents of the previous agreement argued it would have restricted retailers’ ability to bring future lawsuits and done little to end non-competitive practices. The modified agreement represents an increase of $900 million over the earlier agreement. The new rules were published early Tuesday in Visa and MasterCard’s corporate documents and still needs to be endorsed by the court. According to the companies and per the new agreement, Visa will reimburse another $600 million, while MasterCard will shell out a further $108 million. MasterCard and Visa acknowledged that it was a major step towards finally reaching an agreement with merchants in this case.

Commenting on the agreement, Tim Murphy, general counsel for MasterCard said: “We can put this behind us and focus on continuing to innovate with our merchant partners to deliver the experience and convenience that consumers expect.”

Similarly, Kelly Mahon Tullier, Visa’s general counsel, said: “After years of thoughtful negotiation, we are pleased to be able to reach this agreement and move forward in our partnership with merchants to provide consumers convenient, reliable, secure ways to pay.”

Patrick Coughlin, one of the attorneys who brought the case, pointed out that several large merchants, including Walmart, Target, and Kroger, have already excluded themselves from this settlement.

Large retailers have the power to hammer out better deals with Visa and MasterCard than is possible for the common retailer, Coughlin said.

Patrick Coughlin further said: “The top 1 percent of the merchants make up 25% of the nation’s commerce. They were never going to be part of the deal. But this is important for the other 99% who handle the other 75% of purchases.”

He said the new terms are better than the rejected 2012 decision because larger dealers can now get out without negating the deal for smaller retailers. He also said it would channelize more money to smaller retailers, although the amount coughed up by Visa, MasterCard, and the banks would be partially reduced by the withdrawal of the large retailers.

Coughlin concluded by saying: “At a minimum, we got them an additional $200 million.”

Visa’s total share in the case is roughly $4.1 billion. A portion of the settlement will be made using the funds earlier deposited with the court. The rest will be paid from a litigation escrow established on June 28. As the company has already set aside the requisite funds, the settlement is a relief for the company. As a result, fundamentally, the stock is expected to move up in the days ahead.

The historical price chart indicates the stock is trading above its 50-day moving average. Furthermore, the Chaikin money flow indicator is in the positive region. Therefore, we can expect the stock to move up in the short-term.

vis - technical analysis - 19th September 2018

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Sammy is our forex expert, with over 20 years experience in the financial sector, she will be keeping you up to date with the ups and downs of currencies around the world

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