Visa and Mastercard Agree to Slash Fees in $30B Landmark Settlement – Visa and Mastercard have reached a groundbreaking $30 billion settlement on Tuesday, aiming to curtail credit and debit card fees for merchants, potentially leading to consumer savings. This antitrust agreement stands as one of the largest in American legal history, aiming to address claims dating back to 2005.
Merchants have long accused Visa and Mastercard of imposing excessive swipe fees, known as interchange fees, on transactions made with their credit or debit cards. Unlike American Express users, who could be subject to these fees, Visa and Mastercard customers were shielded from these additional charges.
Moreover, there were regulations, such as “anti-steering” rules, preventing merchants from directing Visa and Mastercard customers towards more cost-effective payment methods. As per the settlement terms, Visa and Mastercard will slash interchange rates by four basis points within the United States and commit to keeping swipe fees unchanged for a minimum of three years.
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As per the terms of the settlement, Visa and Mastercard will lower interchange rates by four basis points within the United States and commit to maintaining their current swipe fees for a minimum of three years. Over the course of five years, Visa and Mastercard are mandated to ensure that the average effective systemwide swipe fee remains at least seven basis points below the current average rate.
Additionally, both card networks have committed to eliminating anti-steering provisions. While entering into the settlement, Visa and Mastercard asserted their innocence, emphasizing that the agreement does not compel merchants to pass on any resulting savings to consumers. “By negotiating directly with merchants, we have reached a settlement with meaningful concessions that address true pain points small businesses have identified,” Kim Lawrence, president of Visa North America, said in a press release.
Rob Beard, chief legal officer, general counsel and head of global policy at Mastercard, added in a statement on Mastercard’s website: “This agreement brings closure to a long-standing dispute by delivering substantial certainty and value to business owners, including flexibility in how they manage acceptance of card programs.”
Visa’s assessment indicates that over 90% of the merchants involved in the settlement are small businesses. According to court documents, the fee reductions and limitations alone amount to $29.79 billion. Visa’s representatives refrained from providing further comments beyond the company’s press release. The Post has reached out to Mastercard for their response.
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In March 2023, the Manhattan federal appeals court upheld a connected class action settlement totaling $5.6 billion against Visa and Mastercard, encompassing approximately 12 million merchants. The previous settlement did not address the specific types of fees that Visa and Mastercard could enforce, and it did not encompass all retailers.
Following the recent ruling, Joseph Stiglitz, a Nobel Prize-winning economist hired by the merchants as an expert, stated in an affidavit included in the settlement that the agreement significantly improves merchants’ ability to direct customers based on the critical aspect of competition – pricing. Stiglitz further remarked that the ruling could result in significant savings for merchants. The settlement is currently pending final approval from the Eastern District Court of New York.
