Following a judge’s rejection of an earlier $30 billion agreement as insufficient, Visa and Mastercard announced a revised settlement with merchants who accused the card networks of charging too much to accept their credit cards.
Businesses accused Visa, Mastercard, and banks of conspiring to violate U.S. antitrust laws, notably through the card networks’ collection of “swipe fees” to process transactions.
The settlement reached on Monday would put an end to 20 years of litigation.
However, merchants are already opposing the current agreement, claiming it ignores issues made by Brooklyn, current New York, U.S. District Judge Margo Brodie, whose approval is necessary, when she rejected the previous settlement in June 2024.
The National Retail Federation, the biggest retail trade association in the United States, reports that swipe fees, also known as interchange fees, amounted $111.2 billion, in the country in 2024, up from $100.8 billion in 2023, and quadrupled the level in 2009.
FEES TO BE CAPPED OR REDUCED
Visa and Mastercard are required by the settlement to reduce swipe fees, which are currently between 2% and 2.5%, by 0.1 percentage points over a five-year period.
Merchants would have the option of accepting U.S. cards in certain categories, such as normal consumer cards, commercial cards, and premium consumer cards, which include several well-known “rewards” cards.
For eight years, standard consumer rates would be limited to 1.25%. Additionally, merchants would have more possibilities for imposing surcharges on credit card payments.
According to Visa, a San Francisco-based company, the settlement gives businesses “of all sizes” significant relief, increased flexibility, and choices over how consumers pay them.
Mastercard, a Purchase, New York-based company, stated that businesses and consumers would have a “better payments experience” with more freedom, lower prices, and easier regulations, especially for smaller retailers.
By agreeing to a settlement, neither business acknowledged misconduct. In early morning trade, their stock increased by less than 1%.
The judge referred to the earlier proposed payout as “paltry.”
The $30 billion settlement would have allowed shops to levy surcharges and reduced swipe costs by around 0.07 percentage points over a five-year period.
However, Brodie rejected the agreement, claiming that rates would stay higher than they would have been in the absence of the antitrust infractions and that the $6 billion in yearly savings for retailers was “paltry” in comparison to what Visa and Mastercard could still charge.
She also criticized the agreement for enforcing the “Honor All Cards” rule, which mandates that businesses take all Visa and Mastercard cards or none at all.
Additionally, merchants have long accused Visa and Mastercard of implementing “anti-steering” regulations that prohibit companies from guiding clients toward less expensive payment methods.
The National Association of Convenience Stores’ general counsel, Doug Kantor, stated that while the settlement permits Visa and Mastercard to raise their own prices “without any limitation,” it does not provide banks with an incentive to reduce their rates.
Additionally, he stated that since rewards cards make up more than 80% of credit cards, shops cannot just reject cardholders.
According to Kantor, “merchants can’t afford to say no to most of the cards out there,” during an interview.
