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and 13 large banks reached a $7.25 billion settlement with a large group of merchants that accused the companies of price-fixing.

The settlement is three times the size of the largest previous antitrust settlement, according to Craig Wildfang, the lead plaintiff's attorney and a partner at Robins, Kaplan, Miller & Ciresi.

Still the potential liability

could have been many multiples of the agreed upon number


It will give retailers the ability to offer discounts to customers who choose to pay cash, or to direct them to use credit or debit cards that cost merchants less. Merchants that have more than one store can also choose not to accept Visa or MasterCard at certain locations, even though they may offer them in others.

Still, the changes to Visa and MasterCard business practices are complex, and though some will last for about nine years, they aren't permanent.

"The money side is a significant amount, but it's not on the high side of anything we've talked about," said Henry Polmer, an attorney who has represented merchants, card companies and card-issuing banks. "The devil's in the modifications to the rules," Polmer said. He wasn't directly involved in the case, and said he would need time to review the modifications to determine how much of an impact they would have.

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The National Association of Convenience Stores, which had been part of the plaintiff class, rejected the settlement.

"Not only does the proposed settlement fail to introduce competition and transparency into a clearly broken market, it actually provides Visa and MasterCard with the tools to continue to shield swipe fees from market forces," said NACS Chairman Tom Robinson, who is also president of Santa Clara, Calif.-based

Robinson Oil Corp.

Several of the largest U.S. retailers, such as

Wal-Mart Stores

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, weren't part of the class as they have chosen to pursue their own lawsuits.

The settlement money comes in two parts. The first, $6.05 billion, is a cash settlement to be paid 20 days after preliminary approval, expected in October. The second part, estimated at $1.2 billion, will be generated by Visa and Mastercard withholding interchange funds they receive on credit card transactions during an eight-month period. The funds will consist of .1% on each transaction.

Wildfang estimates the period will start in April or May of next year and run through the end of the year. The funds will be distributed separately to members of the class.

The $1.2 billion will not be refunded to Visa and MasterCard even if the settlement is denied final approval.

Originally, Visa and Mastercard were just going to reduce the interchange rates by .1% rather than setting up a special fund, according to Wildfang, However, the plaintiffs "feared the acquiring banks would not pass that on to the merchants," he said. An email to attorneys at Wilkie Farr & Gallagher, who represented the plaintiffs, wasn't returned.

"Our decision to settle is based on our belief that MasterCard and our stakeholders are best served by an amicable resolution," said Noah Hanft, MasterCard's General Counsel and Chief Franchise Integrity Officer, in a statement. "Although we have strong defenses to all claims, a settlement avoids years of litigation and uncertainties that are inherent in such cases. We believe that today's settlements should resolve all issues with the merchant community."

"We believe settling this case is in the best interests of all parties," read a statement from Joseph W. Saunders, chairman and CEO of Visa Inc. "We are comfortable with the terms, which we do not anticipate will impact our current guidance."

-- Written by Dan Freed in New York


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