Visa and Mastercard have revised a USD 38 billion settlement with merchants as the companies allegedly charged too much for credit card acceptance.
The two companies are hoping to persuade a judge who rejected a smaller accord of USD 30 billion, saying it is inadequate. This settlement could end 20 years’ worth of litigation in which businesses accused Visa, Mastercard, and banks of conspiring to violate US antitrust laws, including through the card networks’ swipe fees. Swipe fees, also known as interchange fees, totalled USD 111.2 billion in the US last year, four times more than in 2009, according to the US retail trade group National Retail Federation (NRF).
Merchants versus the card networks
With this new accord, merchants, including the NRF and the Merchants Payments Coalition, drew opposition, saying that the concerns raised by the New York judge regarding violating US law are still not addressed. Additionally, those who oppose say that businesses will still be paying too much to accept the popular reward cards that dominate the card market.
The initiative calls for Mastercard and Visa to lower their fees, which average 2.35% in 2024 and usually range from 2% to 2.5%, by a 0.1 percentage point for five years. If they lower the fees, merchants could have more choice when it comes to whether to accept US cards in specific categories such as commercial cards, premium consumer cards with rewards, and standard consumer cards. Additionally, standard consumer rates would be capped for eight years at 1.25%, an over 25% reduction. Merchants would also have more options to choose from when imposing surcharges when individuals pay by card, including charging up to 3%, according to a court filing.
Visa believes that the settlement offers merchants of all sizes meaningful relief, while Mastercard said that smaller merchants will especially benefit from it. Two economics experts hired by the merchant plaintiffs concluded that ending the increase of swipe fees could save merchants USD 38 billion by 2031. They also mentioned that the settlement's reforms taken together can save USD 244 billion, offer more competition, and benefit customers who bear the cost of today’s non-competitive payment system.
The judge rejected the USD 30 billion settlement, saying the 0.07 percentage points swipe-fee cut and USD 6 billion annual savings were minimal compared to Visa and Mastercard’s profits. She criticised the deal for keeping the “Honour All Cards” rule and noted fees would stay inflated by antitrust violations. Merchants argue the settlement fixes those issues and targets “anti-steering” rules.
