Visa, MasterCard and 13 of the country's biggest banks have agreed to pay $7.25 billion to settle accusations by retailers that they engaged in price-fixing on credit card transaction fees.

The settlement, on behalf of about 7 million retailers, could be the largest antitrust class-action settlement in U.S. history and is expected to alter the price structure around the plastic cards that are a central feature of U.S. commerce.

Retailers alleged that the collusion resulted in a monopoly, with merchants forced for years to fork over ever higher fees to process the credit cards their customers use, driving up costs for consumers.

But while the deal promises to put money in the pockets of millions of retailers, it appears the controversy is far from over. Appeals are anticipated, and already one major retailers group has rejected the agreement, called it a "mirage" that doesn't go far enough.

K. Craig Wildfang, an antitrust lawyer in Minneapolis with Robins, Kaplan, Miller & Ciresi and lead counsel for the class plaintiffs, said his group will likely file for preliminary approval in September. It could be 18 to 24 months before money is distributed, he said.

The accord, filed Friday in Brooklyn in the U.S. District Court in the Eastern District of New York, comes after weeks of intense negotiations in Manhattan and Brooklyn.

"I am so tired," Wildfang said in an interview. "It's been just a grueling month of negotiating."

The $7.25 billion in cash consists of $6.05 billion to pay for damages and an additional payment estimated to have a value of $1.2 billion that would represent the value to retailers of a temporary reduction in the level of fees they pay on Visa and MasterCard transactions.

Wildfang said the settlement also calls for significant reforms of Visa and MasterCard rules, including a requirement that they negotiate with merchant-organized buying groups. He said he expects the changes to enable merchants to pressure Visa and MasterCard to limit or reduce the fees paid between banks for the acceptance of card-based transactions

Over time, Wildfang said, that should result in lower prices for consumers.

Joseph Saunders, chairman and CEO of San Francisco-based Visa, said in a statement that settling the case "is in the best interest of all parties." Visa said it expects class and individual claims to total about $6.6 billion and that Visa's share will be about $4.4 billion.

Noah Hanft, general counsel and chief franchise integrity officer for Purchase, N.Y.-based MasterCard, said the settlements "should resolve all issues with the merchant community." MasterCard's share of the cash portion of the settlement will total about $790 million on a pre-tax basis, the company said.

However, the National Association of Convenience Stores swiftly announced it was rejecting the settlement. "Not only does the proposed settlement fail to introduce competition and transparency into a clearly broken market, it actually provides Visa and MasterCard with the tools to continue to shield swipe fees from market forces," said association chairman Tom Robinson, who is also president of Robinson Oil Corp. based in Santa Clara, Calif.

Long-running dispute

The national legal fight, in progress for seven years, had its roots in Minnesota.

Michael Schumann, co-owner of St. Louis Park-based Traditions Classic Home Furnishings, which operates furniture stores in St. Paul, St. Louis Park and Naples, Fla., said he was the original plaintiff who first contacted Robins, Kaplan, Miller & Ciresi about his struggle with Visa and MasterCard.

Schumann, now 62, of St. Paul, said he was fed up and contacted that law firm because it had just finished the lucrative tobacco settlement.

"I figured if anybody had the money to take these guys on, it's Robins, Kaplan," Schumann said.

The credit card fees he and his wife pay are the third-biggest overhead expense, after rent and payroll, that their company has, he said.

"We've paid more in credit card fees than we've made in profits in our entire company in recent years," he said. "Overall we probably pay, depending on how good the business is, between $50,000 and $100,000 a year in credit card payments."

He's optimistic that the settlement will change that, but he said he expects any payout to be "minuscule" compared to what they've paid in credit card fees over the years.

"I'm optimistic," Schumann added. "For the first time, we've gotten some structural changes in the way the system works."

The bank defendants in the case include: Bank of America Corp., Barclays Financial Corp., Capital One Financial Corp., JPMorgan Chase & Co., Citigroup Inc., First National Bank of Omaha, Fifth Third Bancorp, HSBC Financial Corp., National City Corp., Texas Independent Bancshares Inc., SunTrust Banks Inc. and Wells Fargo & Co.

Jennifer Bjorhus • 612-673-4683