April 19, 2024

Visa and Mastercard reached a settlement on Tuesday that could save U.S. merchants nearly $30 billion over five years, ending a decades-long legal battle over so-called “swipe fees.”

Under the agreement, the credit card giants will reduce swipe fees for U.S. merchants by four basis points and guarantee that fees will not be raised beyond a ceiling for at least five years, one of the law firms representing the merchant class said in a statement.

The terms of the settlement are also designed to increase competition among credit card issuers by allowing merchants to steer consumers to cards with lower fees and giving merchants greater power to negotiate fees with Visa and Mastercard.

Businesses have long wrestled with credit card issuers over the fees, which are payments that credit card companies and card-issuing banks receive for enabling a transaction. In 2023, American merchants were charged a total of nearly $101 billion for Visa and Mastercard credit cards, a $7.5 billion increase from 2022, according to the latest Nilson Report. Although these fees are borne by merchants, they are often passed along to consumers.

The settlement, one of the largest in U.S. antitrust history, resolves a 2005 lawsuit alleging that merchants were forced to pay “excessive fees” to accept Visa and Mastercard credit cards, and that the two card issuers and member banks violated antitrust laws. Together, Visa and Mastercard make up about 80% of the credit card market.

The new rules and oversight are in addition to the $5.54 billion financial settlement for all U.S. merchant class members that was approved by the courts in March 2023. The settlement, which is among the largest in U.S. antitrust history, is still subject to approval by the U.S. District Court for the Eastern District of New York. If approved, the changes are expected to go into effect in late 2024 or early 2025.

Kim Lawrence, Visa North America’s president, said the settlement has “meaningful concessions that address true pain points small businesses have identified.” More than 90% of the U.S. merchants are small businesses.

Steve Shadowen, co-lead counsel representing the class, said the agreement “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.” The law firm said the agreement represents “a major improvement” from the original terms that were overturned in 2016 by the Second Circuit.

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