This Sept. 5, 2007, file photo shows credit card decals on a store window in Los Angeles
This Sept. 5, 2007, file photo shows credit card decals on a store window in the Hollywood section of Los Angeles. Photo by AP
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NEW YORK − Visa, MasterCard and banks that issue their credit cards have agreed to a $7.25 billion settlement with U.S. retailers, in a lawsuit over the fixing of credit and debit card fees in what could be the largest antitrust settlement in American history.

The settlement, if approved by a judge, would resolve dozens of lawsuits filed by retailers in 2005. The card companies and banks would also allow stores to start charging customers extra for using certain credit cards in an effort to steer them toward cheaper forms of payment. The settlement papers were filed on Friday in U.S. federal court.

Swipe fees − charges to cover processing credit and debit payments − are set by the card companies and deducted from the transaction by the banks that issue the cards, essentially passing on the cost to merchants, the lawsuits said.

The proposed settlement involves a payment to a class of stores of $6 billion from Visa, MasterCard and more than a dozen of the country’s largest banks who issue the companies’ cards. The card companies have also agreed to reduce swipe fees by the equivalent of 10 basis points for eight months for a total consideration to stores valued at about $1.2 billion, according to lawyers for the plaintiffs.

The deal calls for merchants to be allowed to negotiate collectively over the swipe fees, also known as interchange fees. Merchants would also be required to disclose information about card fees to customers, and credit card surcharges would be subject to a cap, according to the settlement papers. Surcharge rules would not affect the 10 states that currently prohibit that practice ‏(including California, New York and Texas‏). An additional $525 million will be paid to stores suing individually, according to the documents.

“This is an historic settlement,” said Bonny Sweeney, a lawyer for the plaintiffs. The settlement “will help shift the competitive balance from one formerly dominated by the banks which controlled the card networks to the side of merchants and consumers,” said Craig Wildfang, who also represented the plaintiffs.

Noah Hanft, general counsel for MasterCard, said the company believed its interests were “best served by an amicable resolution” of the case. Visa CEO Joseph Saunders said the settlement was in the best interest of all parties.

Not everyone was pleased with the proposed settlement, however. One class plaintiff, the National Association of Convenience Stores, rejected the settlement in a statement Friday from its president, Tom Robinson ‏(also the president of Robinson Oil Corp‏). “Not only does the proposed settlement fail to introduce competition and transparency, it actually provides Visa and MasterCard with the tools to continue to shield swipe fees from market forces,” Robinson said. The proposed considerations are a far cry from the $50 billion in swipe fees paid each year by U.S. retailers, he said.

The American Bankers Association, a trade group whose members include the bank defendants, said retailers − not consumers − stood to gain the most from the proposed settlement.

The plaintiffs charged that Visa and MasterCard colluded directly and indirectly through the issuing banks to keep merchants from finding ways to mitigate credit card costs.

Plaintiffs in the case include supermarket chain Kroger Co, pharmacy chain Rite-Aid Corp and shoe retailer Payless ShoeSource, as well as various trade associations.

The National Retail Federation, a trade group representing retailers, said “the test will be whether the injunctive relief is meaningful. Unless it is, the card market will stay broken and neither merchants nor their customers will achieve a long-term benefit.”

A number of banks that issue Visa and MasterCard cards were also named as defendants in the lawsuit. A spokeswoman for Bank of America NA said it believed the terms of the settlement were fair.

An estimated seven million retailers will be affected by the settlement, according to lawyers for the plaintiffs.

Albert Foer, president of the American Antitrust Institute, said the settlement should create more transparency for consumers at the cash register. Because merchants had been forbidden from charging customers extra for costlier payment forms, they often built that cost into the retail price, he said. While it may not lead to lower prices, “it gives the consumers some choice and it should ultimately mean a better deal for everybody,” Foer said.