Visa and Mastercard reached a landmark $30 billion settlement Tuesday that limits merchant credit and debit card fees, some of which will likely be passed on to consumers.
The antitrust settlement is one of the largest in U.S. history and, if approved by the court, would also resolve claims in a lawsuit that began in 2005.
Merchants have accused Visa and Mastercard of charging high swipe and interchange fees when shoppers use credit and debit cards.
Merchants were prevented from passing on additional fees to shoppers who use Visa or MasterCard, as opposed to shoppers who bill American Express for their purchases.
“Anti-steering” rules have also been introduced that prohibit Visa and Mastercard customers from being steered towards cheaper payment methods.
Under the settlement agreement, Visa and Mastercard will lower their exchange rates in the U.S. by 4 basis points and will not increase swipe fees for at least the next three years.
Over a five-year period, Visa and Mastercard’s average system-wide effective swipe fees must also be at least 7 basis points lower than the current average rate.
Both card networks also agreed to remove anti-steering provisions.
Visa and Mastercard denied any wrongdoing in agreeing to the settlement, which does not require merchants to pass on savings to consumers.
“By negotiating directly with our merchants, we reached a settlement with meaningful concessions that address the real pain points identified by small businesses,” said Kim Lawrence, president of Visa North America. press release.
Rob Beard, Mastercard’s Chief Legal Officer, General Counsel and Head of Global Policy, added: statement “This agreement ends a long-standing dispute by providing substantial certainty and value to business owners, including flexibility in how they manage acceptance of their card programs,” Mastercard said on its website. ”.
Visa estimates that small businesses make up more than 90% of payment merchants.
The fee rollback and cap alone are worth $29.79 billion, according to court documents.
A Visa representative declined to comment beyond the company’s press release.
The Post also reached out to Mastercard for comment.
In March 2023, the Manhattan Federal Court of Appeals upheld a related $5.6 billion class action settlement against Visa and Mastercard involving approximately 12 million merchants.
The settlement did not resolve what types of fees Visa and Mastercard might impose, and not all retailers were covered by the settlement.
In response to the latest ruling, Joseph Stiglitz, a Nobel Prize-winning economist hired by the merchants as an expert, wrote in an affidavit included in the settlement that the agreement “takes advantage of price, the cornerstone of competition. “This will greatly enhance the freedom of franchisees to direct customers.” ”
The ruling could also lead to “tremendous” savings for dealers, Stiglitz added.
The settlement currently awaits final approval by the Eastern District of New York.
with post wire
