Visa, Mastercard resolve swipe fee dispute with $30 billion settlement
Visa and Mastercard have finally settled a long-standing legal dispute over the contentious "swipe fees." This resolution could potentially save US merchants an estimated $30 billion in the next five years. The credit card giants have agreed to lower swipe fees for US merchants by four basis points, and cap these fees for a minimum of five years.
Settlement promotes competition among credit card companies
The settlement aims to stimulate competition among credit card issuers. It empowers merchants to steer consumers toward cards with lower fees, and gives them more bargaining power when negotiating fees with Visa and Mastercard. This settlement is the outcome of a 2005 lawsuit accusing the two card companies and their member banks of charging "excessive fees."
Settlement pending approval, implementation expected in 2025
The settlement is awaiting approval from the US District Court for the Eastern District of New York. If approved, the changes are expected to be implemented in late 2024 or early 2025. This follows a $5.54 billion financial settlement for all US merchant class members that was sanctioned by the courts, back in March 2023.
Industry groups demand more action on swipe fees
While industry groups representing both small and large retailers have welcomed the settlement, they believe more action is needed to address swipe-fee issues. Jeff Brabant, Vice President of federal government relations at the National Federation of Independent Business, stated, "While this settlement is a step in the right direction...it does not solve the long-term anti-competitive rate-setting practices that are the root of this problem."
Settlement follows previous multi-billion dollar agreement
This settlement comes after a previous agreement in 2018, where Visa and Mastercard agreed to pay $6.2 billion as part of the same lawsuit filed by a group of 19 merchants. The current proposed settlement aims to address the remaining aspects of the suit, particularly focusing on what retailers have claimed as the anti-competitive nature of these card networks.
Legal counsel supports the settlement
Steve Shadowen, co-lead counsel for the class, has voiced his support for the agreement. He believes it "provides comprehensive market-based solutions to too-high swipe fees, while providing immediate fee relief to merchants as they make these new competitive tools work for them." This statement highlights the potential benefits of this settlement for US merchants.
