Visa, Mastercard to lower ‘swipe fees’ in merchant antitrust suit settlement

As part of a landmark antitrust settlement with U.S. merchants, Visa and Mastercard have agreed to lower and cap credit card interchange fees, which will result in several payments over the next five years. It is estimated that tens of billions of dollars could be saved.

“This settlement is the culmination of eight years of intense litigation and detailed and painstaking negotiations,” Steve Shadowen, co-lead counsel for the seller at Hilliard Shadowen LLP, said in a statement. “This provides a comprehensive market-based solution to excessive swipe fees, while enabling merchants to take advantage of these new competitive tools, instantly reducing fees.”

As part of the settlement, Visa and Mastercard agreed to reduce their published “swipe fees” by at least four basis points for at least three years, which is still pending approval by the U.S. District Court for the Eastern District of New York.

Credit card companies have also agreed not to raise fees beyond the level at the end of 2023 for the next five years.

“By negotiating directly with our merchants, we reached a settlement with meaningful concessions that address the real pain points identified by small businesses,” Kim Lawrence, Visa’s president of North America, said in a statement.

“This agreement resolves a long-standing dispute by providing substantial certainty and value to business owners, including flexibility in how they manage acceptance for their card programs,” said Rob Beard, Mastercard’s chief legal officer. It will put an end to it.”

These changes could save merchants at least $29.8 billion over the next five years, according to a statement from Shadowen and other attorneys representing merchants.

But Doug Cantor, general counsel for the National Association of Convenience Stores, told The Hill that the settlement provides “very minimal and temporary relief” and that “every other person suing… “We’re trying to prevent merchants from charging more.”

“This is a very small group of lawyers who just pushed this issue onto everyone without consulting the broad range of merchants they were supposed to represent and without considering the fact that merchants weren’t going to like it. Yes, and there will probably be a lot of opposition,” Kanter said.

Instead, Cantor said that bringing price competition to the exchange market requires “a real market with real market forces,” and on Capitol Hill he called for more competition within the credit card interchange fee market. He mentioned the ongoing lobbying efforts on how to create a hill.

Last summer, Sens. Dick Durbin (D-Ill.) and Roger Marshall (R-Kansas) reintroduced the Credit Card Competition Act. This gives large financial institutions (defined as those with $100 billion or more in assets) at least two network options for processing credit card transactions.

At least one of them has to be an option other than Visa or Mastercard, which make up about 80% of the U.S. credit card exchange market.

Retailers are rallying support for the bill over opposition from the Electronic Payments Coalition (EPC), an industry group representing Visa, Mastercard and other major credit card companies as well as major unions.

In response to the settlement, EPC Executive Chairman Richard Hunt said the Durbin bill “continues to be unnecessary.”

“This agreement will help small businesses better than the haphazard, experimental legislation that previously benefited only the largest corporate megastores. The agreement reached should be self-sustaining,” Hunt said.

Kanter, who characterized the settlement as “Visa and Mastercard using the legal process as a sword and shield to cut charges for other merchants,” disagrees.

“The best way to address this is for Congress to step in and make it clear that there should be a competitive market,” Kantor said.

Updated at 11:14 a.m. EDT.