Mastercard Inc (NYSE:MA) has narrowly escaped a $18 billion lawsuit following a decision by a London Court to dismiss a $18 billion class action suit against the company by Quinn Emanuel Urquhart & Sullivan.
The class action lawsuit was filed by Quinn Emanuel Urquhart & Sullivan on behalf of 46 million consumers. The lawsuit accused Mastercard of overcharging consumers for goods and services paid using their mastercard credit and debit cards. Businesses are allowed to charge a transaction fee though the amount is supposed to be limited. Strict regulations on bank charges for processing card payments were implemented in 2015. However, some have maintained high charges in order to gain more profit.
The UK government recently announced that debit and credit card charges imposed on customers will be completely outlawed in 2018. This has led to speculation on how retailers will handle the matter. There have been suggestions that some will raise their prices to maintain the extra profits. Meanwhile, the recent ruling means Mastercard just avoided what could have been one of the largest class action suits in history.
“The British government’s move to scrap charges completely by January 2018 promises greater transparency over future prices paid by consumers,” pointed out online news outlet, The Conversation.
The decision to dismiss the lawsuit was made by the UK’s Competition Appeals Tribunal’s (CAT). Mastercard was subjected to an investigation on the matter by the European Commission and the ruling was that it had been carrying out anticompetitive practices through interchange fees. This was also considered a direct violation of the EU Treaty. The company filed an appeal against the EU ruling in 2014 but a European court confirmed the decision. This led to fees being capped at 0.3 percent of the value of every credit card transaction and 0.2 percent for debit card transactions.
Mastercard has not always been favored by judicial rulings in lawsuits regarding processing fees. The company lost a lawsuit filed by Sainsbury’s supermarket over processing fees and was ordered to pay a significant amount in damages.
Mastercard stock closed the latest trading session on Monday at $129.52.