BROOKLYN, N.Y. -- Visa USA Inc. and MasterCard International Inc., targets of an antitrust suit by some of the nation's largest retailers, suffered a setback yesterday when a federal judge certified the case as a class action, a decision that could cost the defendants $24 billion in damages.
The lawsuit alleges that MasterCard and Visa USA, a unit of Visa International Inc., abuse their monopoly power in the credit-card industry to dominate the debit-card industry. The suit was brought by Wal-Mart Stores Inc., Sears, Roebuck and Co., and 11 other large and small retailers.
The complaint alleges that Visa and MasterCard force retailers to accept their debit cards -- VisaCheck and MasterMoney -- if merchants also want to handle purchases made by the defendants' credit-card holders. Visa and MasterCard charge merchants up to 25 times more per transaction than competing debit cards charge, the suit contends.
In a 45-page ruling, U.S. District Judge John Gleeson said the named plaintiffs would adequately represent the interests of 4 million U.S. retailers.
The judge also urged the 2nd U.S. Circuit Court of Appeals to hear Visa and MasterCard's anticipated appeal of his ruling. Federal law allows the firms to seek an immediate appeal, though the court is not required to hear the case.
"This litigation poses enormous financial risks for the defendants, risks that are obviously increased drastically by certification of the class," Gleeson wrote.
Had the judge refused to grant class action status and limited the case to the plaintiffs named in the complaint, total potential damages would have been much smaller -- no more than $2.4 billion, lawyers said.
Certification also allows small businesses nationwide to participate in the suit.
Without it, "millions of small merchants will lose any practical means of obtaining damages for defendants' allegedly illegal conduct," Gleeson wrote.
Kelly Presta, a vice president for Visa USA, said the company was "very optimistic" about the prospects for success on appeal.
"Judge Gleeson has very appropriately recommended an appeal," he said. "We're extremely encouraged by the judge's comments."
A spokeswoman for MasterCard also said the company will appeal and noted that the certification ruling did not address the merits of the case.
"We remain confident that our rules, which serve to protect consumers and ensure that their MasterCards are accepted by all MasterCard merchants, will be upheld," the company said in a statement.
The plaintiffs seek $8.1 billion in actual damages, which would be tripled under federal antitrust law. Lloyd Constantine, the lawyer for Wal-Mart and the other retailers who brought the suit, was not immediately available.