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    Home / News / Business News / Visa, Mastercard resolve swipe fee dispute with $30 billion settlement
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    Visa, Mastercard resolve swipe fee dispute with $30 billion settlement
    The settlement aims to stimulate competition among credit card issuers

    Visa, Mastercard resolve swipe fee dispute with $30 billion settlement

    By Pratyaksh Srivastava
    Mar 27, 2024
    01:38 pm

    What's the story

    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.

    Details

    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."

    Pending approval

    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.

    Demands

    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."

    Case history

    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 support

    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.

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