Mastercard has reached an agreement to settle monetary damages claims in the U.S. merchant class-action litigation.

“We are taking a significant step toward closing a chapter in a long-standing case,” said Tim Murphy, general counsel, Mastercard. “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.”

Merchants in the US had alleged card networks were setting fees and card acceptance rules that benefit the banks, under a system in which the issuers set the fees for the banks and then charge the merchants. Instead, the merchants wanted to negotiate fees directly with the banks.

The suit was brought against Visa, Mastercard and the banks in 2005. A number opted out of the suit in 2012 due to terms that would have stopped them from filing lawsuits to do with future swipe-fee increases.

A number of large merchants, including Amazon and Home Depot, are pursuing their own suits. Merchants paid card issuers $43.4 billion in Visa and Mastercard credit card interchange fees in 2017, up from $25.9 billion in 2012.

In addition to the original 2012 monetary terms, Mastercard’s share of the financial agreement is an additional $108 million, which is based upon the allocation of financial responsibility that was set out in the judgment and settlement sharing agreements that were executed in February 2011. In total, the defendants have agreed upon an additional payment of $900 million in the current agreement.

The company recorded a $210 million charge in its second-quarter 2018 financial statements, which will cover the financial obligation under this agreement and for estimated liabilities related to filed and anticipated opt-out merchant cases.

After court approval of the monetary agreement, Mastercard and its customer financial institutions will receive a release of all monetary claims alleged by the merchant class members concerning the company’s interchange and fee structure and merchant acceptance rules. This release covers all previous, as well as future claims, for a period of five years after resolution of all appeals.

by Alex Hamilton
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