New York — Visa and Mastercard announced a revised $38bn settlement with merchants who accused the card networks of charging too much to accept their credit cards, hoping to satisfy a judge who rejected a smaller accord as inadequate.
Monday’s settlement would end 20 years of litigation in which businesses accused Visa, Mastercard and banks of conspiring to violate US antitrust laws, including through the card networks’ collection of “swipe fees”.
But the accord drew opposition from merchant groups that said it doesn’t address concerns that US district judge Margo Brodie in Brooklyn, New York, whose approval is required, raised in rejecting a $30bn settlement in June 2024.
These groups, including the National Retail Federation, the largest US retail trade group, and the Merchants Payments Coalition, say businesses would still pay too much, including to accept the popular rewards cards that dominate the card market.
“You can’t just suddenly tell more than 80% of your card customers you’re not going to take their cards,” Stephanie Martz, the NRF’s general counsel, said in an interview. “You would lose a lot of business.”
Also known as interchange fees, swipe fees totalled $111.2bn in the US in 2024, up from $100.8bn in 2023 and quadruple the level in 2009, the NRF said.
The settlement calls for Visa and Mastercard to lower swipe fees, which are now typically 2% to 2.5%, by 0.1 percentage point for five years.
Merchants would be able to choose whether to accept US cards in specific categories including commercial cards, premium consumer cards including many rewards cards and standard consumer cards.
Standard consumer rates would be capped for eight years at 1.25%, a more than 25% reduction.
Merchants would also get more options to impose surcharges when people pay by card, including an “unfettered” ability to charge up to 3%, according to a court filing.
Lawyers for the merchants said the $38bn settlement value reflects the projected reduction of swipe fees through 2031, as estimated by two experts including Nobel prize-winning economist Joseph Stiglitz.
The two economics experts also believe the changes, taken together, can conservatively save merchants more than $200bn over the course of the settlement, the lawyers said.
Visa, based in San Francisco, said the settlement provides merchants of all sizes with meaningful relief, more flexibility and options to control how customers pay them.
Mastercard, based in Purchase, New York, said smaller merchants in particular would benefit from more flexibility, lower costs and simpler rules.
Neither company admitted wrongdoing in agreeing to settle. Their shares were little changed in afternoon trading.
Reuters
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