The US Second Circuit Court of Appeals has scrapped a $7.25bn antitrust settlement between Visa and MasterCard and millions of retailers after finding it unreasonable and inadequate.
The latest verdict has revived one of the biggest antitrust settlements in the US history, which began in 2005 over illegal anti-competitive practices of Visa and MasterCard.
The jury said that lawyers who represented more than 12 million retailers across the US failed to do enough to protect their interests.
In fact, the settlement divided the applicant into two classes, one of which agreed to share up to $7.25bn monetary relief while the other would get injunctive relief in the form of Visa and MasterCard changing their network rules.
The jury termed the accord inequitable as one class could choose to opt out of the settlement while those receiving injunctive relief has to ultimately sacrifice their rights to challenge Visa and MasterCard on certain issues in the future.
In concurrence to the court’s decision, Judge Pierre Leval said, "This is not a settlement; it is a confiscation."
In the verdict, one of the jury wrote that the settlement "binds not only members of the Plaintiff class who receive compensation as part of the deal, but also binds in perpetuity, without opportunity to reject the settlement, all merchants who in the future will accept Visa and MasterCard."
The Retail Industry Leaders Association (RILA), which participated as a member of the class and objected to the settlement in 2014, has applauded the latest decision.
Commenting on the decision, RILA executive vice president and general counsel Deborah White said: "RILA enthusiastically welcomes the circuit court’s decision to throw out this harmful settlement.
"Quite simply, the settlement orchestrated by the card networks and banks would have undermined merchants’ legal rights forever and would have allowed Visa and MasterCard to impose higher and higher swipe fees with impunity. Today’s decision is a victory for all merchants and consumers."
The association said that the settlement failed to address the anti-competitive practices that were the root cause for the lawsuits and denies merchants their right to challenge these practices ever again in court.
The setback comes after Wal-Mart and Kroger recently filed separate cases against Visa for forcing them to ask customers to use signature for transaction instead of a personal identification number (PIN).