Visa and Mastercard agree to $38bn settlement in swipe fee dispute

Visa and Mastercard announce a $38 billion settlement with merchants over high swipe fees, including fee reductions, surcharges options, and eight-year caps on standard consumer cards, resolving a 20-year antitrust battle.

Visa and Mastercard have agreed to a revised $38 billion settlement with merchants who accused the card networks of overcharging for credit card acceptance, aiming to satisfy a judge who previously rejected a smaller $30 billion deal as inadequate.

The settlement ends two decades of litigation in which merchants claimed Visa, Mastercard, and issuing banks conspired to violate U.S. antitrust laws, primarily through collection of “swipe fees” or interchange fees. However, some merchant groups remain critical, saying the accord does not fully address concerns raised by U.S. District Judge Margo Brodie of Brooklyn, whose approval is required.

Groups opposing the settlement, including the National Retail Federation (NRF) and the Merchants Payments Coalition, argued that businesses would still pay too much, particularly to accept popular rewards cards.

“You can't just suddenly tell more than 80% of your card customers you're not going to take their cards,” said Stephanie Martz, NRF general counsel. According to NRF data, swipe fees in the U.S. totaled $111.2 billion in 2024, up from $100.8 billion in 2023 and more than four times the level in 2009. Key Provisions of the Settlement

Fee Reductions: Visa and Mastercard will lower swipe fees, which averaged 2.35% in 2024, by 0.1% points for five years.

Card Acceptance Options - Merchants can decide whether to accept U.S. cards in categories including commercial, premium consumer (rewards) cards, and standard consumer cards.

Rate Caps - Standard consumer card rates will be capped at 1.25% for eight years, a reduction of over 25%.

Surcharges - Merchants can impose surcharges on card payments, with the ability to charge up to 3%.

Visa stated that the settlement offers meaningful relief to merchants of all sizes, while Mastercard highlighted benefits particularly for smaller businesses. Economic Impact

Two economists retained by the merchant plaintiffs — Nobel laureate Joseph Stiglitz and University of Washington professor Keith Leffler — estimated the settlement could save merchants $38 billion by 2031 by ending the “upward spiral” of swipe fees. Their court filing also projected total potential savings of $224 billion, promoting competition and benefiting consumers. No Admission of Wrongdoing

Visa and Mastercard did not admit any wrongdoing as part of the settlement. Shares of both companies remained largely unchanged following the announcement. Judge Rejected Previous $30 Billion Deal

The earlier $30 billion settlement would have cut swipe fees by about 0.07% points over five years and offered more leeway for merchant surcharges. Judge Brodie rejected it, stating the savings of $6 billion annually were “paltry” relative to what Visa and Mastercard could still charge. She also criticised the retention of the “Honour All Cards” rule, which forces merchants to accept all cards or none.

The revised settlement addresses this concern and also targets anti-steering rules that have historically prevented merchants from directing customers to cheaper payment methods. Support and Opposition

The Electronic Payments Coalition, which includes Visa, Mastercard, and major banks such as Bank of America, Capital One, Chase, and Citibank, supports the settlement. Executive Chairman Richard Hunt noted it would reduce swipe fees below levels proposed in a Senate bill sponsored by Senators Richard Durbin and Roger Marshall, which many in the banking sector oppose.

However, Doug Kantor, General Counsel for the National Association of Convenience Stores and a Merchants Payments Coalition member, criticised the deal for failing to provide banks incentives to lower rates. He said it lets Visa and Mastercard raise fees without limitation and restricts merchants’ ability to negotiate fees with different banks.

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