Visa and Mastercard Reach $30 Billion Settlement to Limit Card Fees
In a landmark move, Visa and Mastercard have reached a $30 billion settlement to limit credit and debit card fees for merchants. This settlement is expected to lead to savings for consumers through lower prices as a result.
The antitrust settlement is one of the largest in U.S. history and, pending court approval, would resolve claims from litigation that began back in 2005. Merchants have long accused Visa and Mastercard of charging inflated swipe fees and imposing anti-steering rules that prevent them from directing customers to cheaper payment methods.
As part of the settlement announced, Visa and Mastercard will reduce interchange rates by four basis points in the United States for three years and cap rates for five years. Additionally, both card networks have agreed to remove anti-steering provisions. While they deny any wrongdoing, the fee rollbacks and caps alone are valued at $29.79 billion, with small businesses making up over 90% of the settling merchants.
Joseph Stiglitz, a Nobel Prize-winning economist hired by the merchants as an expert, stated in an affidavit that the settlement “greatly enhances merchants’ freedom to steer customers using the linchpin of competition – prices.” He believes that this could result in significant savings for merchants, with competition leading to lower prices for consumers.
This settlement comes after a federal appeals court in Manhattan upheld a related $5.6 billion class-action settlement by Visa and Mastercard last March, which covered about 12 million merchants but did not address all aspects of fee imposition by the card networks.
Overall, this settlement marks a significant step towards addressing the concerns raised by merchants regarding credit and debit card fees, with potential benefits for both businesses and consumers alike.
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