Visa, MasterCard Rebuffed by High Court in Merchants’ Suit

The Supreme Court on Monday rejected an appeal by Visa USA and MasterCard International Inc. of a ruling that made 4 million retailers part of an antitrust lawsuit said to be seeking as much as $100 billion in damages from the credit card giants.

The justices let stand a ruling by a U.S. appeals court in New York that gave the retailers class-action status in a 1996 lawsuit accusing Visa and MasterCard of using their power in the credit card industry to force merchants to accept their allegedly costly debit cards.

The Supreme Court rejected the appeal without any comment or dissent, clearing the way for the case to go back to the trial judge, U.S. District Judge John Gleeson in Brooklyn, for more proceedings.

The lawsuit, led by Wal-Mart Stores Inc., the world’s biggest retailer, alleged that Visa and MasterCard forced the retailers to pay excessive transaction fees, driving up costs to consumers.

Lloyd Constantine, the lead attorney representing the retailers, said the judge probably will lay out a schedule for the trial in the next week or two. The case had been delayed by appeals for two years.

MasterCard general counsel Noah Hanft expressed disappointment that the high court did not review the class certification issue.

“By not taking this opportunity to clarify the confusing standards for class certification that exist among district and appellate courts today, the Supreme Court may be opening the doors to increasing class-action abuse,” he said.

Kelly Presta, a Visa vice president, said in a statement: “We are disappointed that the Supreme Court has decided not to consider our case at this time and, specifically, whether the case should proceed as a class.”

He said the high court’s decision on class status has no effect on the merits of the case, adding: “As this case moves forward, we look forward to addressing the merits and other important matters with the court.”

In the Supreme Court appeal, Visa and MasterCard said the retailers seek damages of about $100 billion and said the large class could make damages so high that the defendants will be coerced into settling, regardless of the merits of the claims.

But the retailers derided the $100-billion figure as “fanciful” and concocted for its “apparent shock value.” They told the high court the case involved a preliminary damages estimate of $8 billion.

The retailers said Visa and MasterCard included in their calculation the $63 billion that the retailers would save over the next decade if the trial judge grants a requested injunction.

Wal-Mart and the other retailers objected to having to accept Visa and MasterCard debit cards, saying the cards carry higher transaction fees than other ATM cards.

Visa and MasterCard are owned by major banks and together control more than 75% of U.S. credit card sales.

The appeals court, by a 2-1 vote, upheld a federal judge’s decision allowing class certification. In contesting class status, Visa and MasterCard said the retailer class was too large to be manageable and the retailers used flawed economic theories in presenting their case.

The retailers replied that without class certification, millions of merchants would be deprived of compensation for damages.

In a separate decision Monday, the Supreme Court refused to let credit-reporting firms sell lists of consumers to lenders seeking to target the most desirable customers, turning aside a challenge to a Federal Trade Commission order.

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Bloomberg News was used in compiling this report.