Mastercard Fined $18.6 Billion In Class Action Court Ruling For Over-charging U.K. Citizens #GotBitcoin
Mastercard Inc. faces the prospect of a 14 billion-pound ($18.6 billion) U.K. class action — the largest of its kind — after losing another battle at the country’s highest court over illegal swipe fees. Mastercard Fined $18.6 Billion In Class Action Court Ruling For Over-charging U.K. Citizens #GotBitcoin
Mastercard has faced numerous legal challenges since European Union courts said its payment fees unfairly restricted competition. The decision means the long-running British case, which started in 2016, will now be reconsidered by a specialist tribunal. Mastercard shares fell 1.2% in New York trading.
“Mastercard has been a sustained competition law breaker,” said Walter Merricks, the former head of the U.K. Financial Ombudsman Service, who is bringing the case. “Instead of apologizing and accepting responsibility for the wrongs it committed, all Mastercard has done is to bury its head in the sand and to get its lawyers to raise what have now been clearly and finally determined to be bad arguments.”
Mastercard said the legal case is “fundamentally flawed.”
“No U.K. consumers have asked for this claim,” the company said in a statement. “It is being driven by ‘hit and hope’ U.S. lawyers, backed by organizations primarily focused on making money for themselves.”
The decision was handed down following the death of Judge Brian Kerr, who had presided over the hearing. His vote would have led to a 3-2 ruling to dismiss the appeal. After his death, two dissenting judges dropped their opposition.
The case stems from an EU ruling that the card fees that the company had charged for transactions were unfair and a breach of competition law.
It comes after the Supreme Court in June ruled against Mastercard and Visa Inc. in a similar case brought by some of the largest British retailers over the fees, levied by banks at rates set by the card companies each time a transaction leads to a card swipe at a register.
The ruling also paves the way for further consumer class-action lawsuits, which were made possible by a 2015 law change but have struggled to get traction. When considering the question of individual damages, the Supreme Court has now lowered the bar in similar group actions, said Louise Freeman, a competition lawyer at Covington & Burling.
The ruling means “it is not the job of the Competition Appeal Tribunal to set up too many hurdles,” she said.
Visa, Mastercard Prepare To Raise Credit-Card Fees
Merchants could end up paying an extra $502 million annually in fees, according to a consulting firm.
Visa and Mastercard are planning to increase fees that many merchants pay when they accept customers’ credit cards.
The fee increases are scheduled to start in October and April, according to people familiar with the matter and documents viewed by The Wall Street Journal. Many of the increases are for online purchases.
The changes could result in merchants paying an additional $502 million annually in fees, according to CMSPI, a consulting company that works with merchants.
Increases in network fees will make up a little more than half of that revenue, CMSPI estimated. The rest will come from increases in interchange fees, also called swipe fees. Merchants pay these fees when shoppers pay via credit card.
The economy of interchange fees is largely hidden from shoppers. But the fees are a major source of contention between the card networks and merchants large and small, from giant online retailers to corner coffee shops.
U.S. merchants paid an estimated $93 billion in Visa and Mastercard credit-card fees last year, according to the Nilson Report, an industry publication. That was up from about $33 billion in 2012.
Merchants pass along at least some of that cost to consumers in the form of higher prices. More small businesses have started offering discounts to shoppers who pay by debit card, cash or check.
Card networks such as Visa and Mastercard set the fees that the merchants pay. Network fees get pocketed by Visa and Mastercard. Interchange fees go to the bank that issued the card.
Visa, Mastercard and the big banks have said the fees help cover costs related to fraud prevention and innovation. The banks often use the money they get from interchange fees to fund popular credit-card rewards programs.
Doug Kantor, general counsel of the National Association of Convenience Stores, said that many businesses are already being hurt by inflation and high interest rates, or still recovering from the pandemic.
“It’s just a bad combination and bad timing for any of these fee increases to happen,” Kantor said.
Card fees and their effect on businesses have caught the attention of some in Congress. Lawmakers recently reintroduced legislation in both the House and Senate that would give merchants the ability to process many Visa and Mastercard credit cards over alternate networks. A similar rule already exists for debit cards.
The bill could potentially lower the fees that merchants have to pay. The House and Senate bills have each been referred to a committee.
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