Visa, MasterCard Merchants Better With Pact, Expert Says

Merchants will be better off with a multibillion-dollar price-fixing settlement with Visa Inc. (V) and MasterCard Inc. (MA) over swipe fees than they would be if they went to trial, a court appointed expert said.

Alan O. Sykes, a New York University law professor, found that U.S. merchants face “a substantial probability of failure” if they proceed with the case, according to a memorandum filed yesterday in Brooklyn, New York federal court. Sykes, who was asked by U.S. District Judge John Gleeson to weigh in on the pact, also found some concerns with legal releases and the possible impact of certain rule changes promised in the deal.

“The expected returns to continued litigation are highly uncertain,” Sykes said in the memorandum. “Plaintiffs face a substantial probability of securing little or no relief at the conclusion of trial.”

Announced last July, the settlement was estimated at one time to be worth as much as $7.25 billion and was described by lawyers for the plaintiffs as the largest-ever U.S. antitrust accord.

Dozens of major retailers, including the world’s biggest, Wal-Mart Stores Inc., (WMT) opposed the deal, claiming merchants should receive more money. They contend promised rule changes wouldn’t be helpful and that the card companies would have too much freedom to raise fee rates in the future.

The size of the settlement will be reduced based on the number of retailers that decided to opt out, according to court documents.

A hearing on final approval of the accord is scheduled for Sept. 12.

The case is In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, 05-md-01720, U.S. District Court, Eastern District of New York (Brooklyn).

To contact the reporter on this story: Christie Smythe in Manhattan federal court at csmythe1@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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