Visa, Mastercard’s $30 Billion Settlement Marks Milestone in Fee Dispute
Visa and Mastercard have reached a landmark settlement estimated at $30 billion, aiming to curtail credit and debit card fees for merchants, potentially leading to lower prices for consumers. This antitrust settlement, one of the largest in U.S. history, seeks to resolve most claims in nationwide litigation dating back to 2005.
Critics argue that the settlement may not adequately address the issue, suggesting that any savings would be short-lived and that fees would remain high. Merchants have long accused Visa and Mastercard of imposing inflated swipe fees and restricting them from steering customers towards cheaper payment methods.
Under the terms of the settlement, Visa and Mastercard will lower swipe rates by at least four basis points for three years and ensure an average rate seven basis points below the current average for five years. Additionally, both networks will cap rates and remove anti-steering provisions for five years, giving merchants more flexibility to offer discounts or surcharges.
The fee reductions and caps alone are valued at $29.79 billion, with small businesses expected to benefit the most. Visa and Mastercard maintain their innocence, stating that the settlement addresses concerns raised by small businesses.
However, opposition to the settlement is anticipated, particularly from merchants who opted out of a previous settlement and are pursuing separate lawsuits. Critics argue that U.S. merchants still face high swipe fees compared to their counterparts in other countries, despite nearly two decades of litigation.
Approval of the settlement by U.S. District Judge Margo Brodie in New York City is anticipated by late 2024 or early 2025, with the possibility of appeals. Some industry groups view the settlement as inadequate, considering it a minor improvement in a longstanding issue.
Despite the concessions made by Visa and Mastercard, concerns remain about the long-term impact on merchants and consumers. While some believe that the settlement could result in significant savings for merchants, others emphasize the need for broader reforms in the payment card industry.
Legislation has been proposed to address competition concerns in the credit card market, but the settlement may dampen efforts for legislative reform. The outcome of this settlement will likely have far-reaching implications for the payment card industry and the retail sector.
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