Visa (V.N), and Mastercard (MA.N), announced a revised $38 billion settlement with merchants who accused the card networks of charging too much to accept their credit cards, hoping to satisfy a judge who rejected a smaller accord as inadequate.
Monday’s settlement would end 20 years of litigation in which businesses accused Visa, Mastercard and banks of conspiring to violate U.S. antitrust laws, including through the card networks’ collection of “swipe fees.”
But the accord drew opposition from merchant groups that said it doesn’t address concerns that U.S. District Judge Margo Brodie in Brooklyn, New York, whose approval is required, raised in rejecting a $30 billion settlement in June 2024.
These groups including the National Retail Federation, the largest U.S. retail trade group, and the Merchants Payments Coalition say businesses would still pay too much, including to accept the popular rewards cards that dominate the card market.
“You can’t just suddenly tell more than 80% of your card customers you’re not going to take their cards,” Stephanie Martz, the NRF’s general counsel, said in an interview. “You would lose a lot of business.”
Also known as interchange fees, swipe fees totaled $111.2 billion, in the United States in 2024, up from $100.8 billion, in 2023 and quadruple the level in 2009, the NRF said.
FEES TO BE REDUCED OR CAPPED
The settlement calls for Visa and Mastercard to lower swipe fees, which averaged 2.35% in 2024 and typically range from 2% to 2.5%, by 0.1 percentage point for five years.
Merchants would be able to choose whether to accept U.S. cards in specific categories including commercial cards, premium consumer cards including many rewards cards, and standard consumer cards.
Standard consumer rates would be capped for eight years at 1.25%, a more than 25% reduction.
Merchants would also get more options to impose surcharges when people pay by card, including an “unfettered” ability to charge up to 3%, according to a court filing.
Visa, based in San Francisco, said the settlement provides merchants of all sizes with meaningful relief.
Mastercard, based in Purchase, New York, said smaller merchants in particular would benefit.
Two economics experts hired by the merchant plaintiffs, Nobel Prize-winning economist Joseph Stiglitz and University of Washington professor Keith Leffler, said ending the “upward spiral” in swipe fees could save merchants $38 billion by 2031.
In a court filing, the experts also said the settlement’s reforms taken together could save $224 billion, unlock significant competition, and benefit consumers who bear the cost of today’s “inefficient and noncompetitive payments system.”
Visa and Mastercard did not admit wrongdoing in agreeing to settle. Their shares were little changed in afternoon trading.
JUDGE CALLED EARLIER PROPOSED PAYOUT ‘PALTRY’
The $30 billion settlement would have lowered swipe fees by about 0.07 percentage points over five years, and also given merchants more room to impose surcharges.
But in rejecting that accord, Brodie said fees would remain above where they would be absent the antitrust violations, and the $6 billion of annual savings for merchants was “paltry” relative to how much Visa and Mastercard could still charge.
She also faulted the accord for sticking merchants with the “Honor All Cards” rule requiring that they accept all Visa and Mastercard cards, or none.
The merchant plaintiffs believe the settlement addresses that concern. They have also long accused Visa and Mastercard of enforcing “anti-steering” rules that prevent them from directing customers toward cheaper means of payment.
BANKING PAYMENTS GROUP SUPPORTS SETTLEMENT
Among those supporting the settlement is the Electronic Payments Coalition, whose members include the card networks and large issuers such as Bank of America (BAC.N), Capital One (COF.N), Chase (JPM.N), and Citibank (C.N).
Executive Chairman Richard Hunt said the accord would reduce swipe fees below those contemplated in a Senate bill sponsored by Democrat Richard Durbin of Illinois and Republican Roger Marshall of Kansas, which much of the banking industry opposes.
