Morgan Stanley analysts published a report on June 25 in which they mentioned that senior leaders from Visa and MasterCard had two days of settlement talks last month. The report observed, “Our view has always been that there is a very low likelihood of this case going to trial, and these actions by the court support that view,” in reference to the settlement sessions supervised by Judge Gleeson.
The merchants who have brought the lawsuit say that the credit card companies created rules that prevented them from offering discounts to those who paid in cash or help customers to adopt a less costly for of payment. The merchants including D’Agostino Supermarkets Inc and Payless Shoe Source allege that the policies of the credit card companies are costing stores an estimated $50 billion each year.
In a similar case consisting of a consolidated set of cases in the Brooklyn federal court, Visa and MasterCard has already paid $3.05 billion to settle, but that case covered the atrocities/grievances only up to Jan 1. 2004. However, the plaintiffs in the present case say that the behavior and policies of the card companies have continued unchanged. The merchants believe that monetary damages could run into tens of billions of dollars – a claim vehemently denied by both Visa and MasterCard.
The case, which is already seven years old, alleges that banks, Visa and MasterCard worked together to steer merchants towards certain forms of payments that was beneficial to the credit companies and the banks. The report of Morgan Stanley analysts maintain that the settlement could be around $10 billion though Visa would be “insulated from direct economic exposure” since it already has in place a plan to cover the costs of the settlement. The Morgan Stanley report also mentions that the banks which issue credit cards could also be affected as interchange fees could be lowered and banks may be forced to pay penalties.