Visa, Mastercard and Others Will Pay Extra $900M to Close Merchant Fees Suit

Visa Inc. (V) and Mastercard Inc. (MA) shares traded lower in pre-market trading Tuesday after the credit card companies said they, as well as other defendants, will pay an extra $900 million to retailers in a settlement that would ultimately cost the industry $6.2 billion and draw a line under one of the most expensive antitrust lawsuits in U.S. history.

Visa said its share of the extra $900 million payout, which amends a $7.25 billion settlement first agreed in 2012, would be $600 million and would be paid from the company's current litigation reserves. Visa's total payout in the case, which was first brought by merchants in 2005, would be $4.1 billion, the company said. Mastercard's additional payment would be $108 million, the company said, which is covered by a $210 million charge it applied to its second quarter earnings.

"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," said Visa's general counsel Kelly Mahon Tullier. "This outcome benefits all parties and enables us to focus more of our resources and attention to building the future of digital commerce together."

Visa shares were marked 0.4% lower in pre-market trading Tuesday, indicating an opening bell price of $145.60 each, a move that would trim the stock's year-to-date gain to around 27.2%. Mastercard shares were seen 0.68% lower at $215.00, clipping its year-to-date gain to 42%.

Visa also said that around $700 million could be returned to the card company defendants in the case, with $467 million going to Visa directly, if more than 15% of the current plaintiffs drop out of the existing settlement. If more than 25% drop out, Visa said, the entire settlement agreement could be terminated.

Several other defendants, mostly banks like JPMorgan Chase & Co. JPM that credits cards, were also party to the anti-trust lawsuit that alleged merchants were overcharged for allowing customers to use the cards during purchase.  

"The claims were originally brought by a class of U.S. retailers in 2005. The current agreement addresses monetary claims, and does not resolve class claims seeking modifications to network rules," Visa said.

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