Visa Inc. and Mastercard Inc. agreed to cut some of the fees they charge merchants and relax two of their most controversial rules in an effort to bring a 20-year legal battle with retailers to a close.
If approved, the settlement could ultimately save merchants more than $200 billion over the course of the settlement period, according to Joseph Stiglitz and Keith Leffler, who served as expert economists in the case on behalf of the retailers. That would make it one of the largest-ever class-action settlements of a US antitrust case.
As part of the agreement, the networks will reduce the average effective interchange rate — a measure of the fees retailers pay when customers use cards at checkout — by 10 basis points for five years for US credit-card purchases, regulatory filings show. Standard US consumer credit rates will be capped at 125 basis points, according to the filings.
“We believe that this is the best resolution for all parties, delivering the clarity, flexibility and consumer protections that were sought in this effort,” Mastercard said in an emailed statement. “Smaller merchants will gain in this settlement – more acceptance choices, reduced costs and simplified rules.”
Total credit and debit card swipe fees hit a record $187.2 billion last year, according to the trade group the Merchant Payments Coalition.
Retailers have long bemoaned the fees. While Visa and Mastercard determine the size of interchange rates, the revenue is largely passed on to the banks that issue the cards, such as JPMorgan Chase & Co., Capital One Financial Corp. and Citigroup Inc.
The Merchant Payments Coalition slammed the latest deal, which was first reported by the Wall Street Journal on Saturday. The trade group argued that Visa and Mastercard only agreed to limit the portion of the fees that they pass on to lenders — not the fees they keep for themselves.
“The minuscule reduction proposed in the settlement on bank fees could still allow Visa and Mastercard to be able to raise their own fees without any limits,” said Jennifer Hatcher, an executive committee member for the MPC. “All of the supposed merchant and consumer savings could easily be canceled by Visa and Mastercard increasing their fees.”
The new pact follows an agreement reached between the parties last year, which would have saved merchants at least $30 billion over five years. That earlier accord — which would have been one of the most significant antitrust settlements ever — was derailed when US District Judge Margo Brodie rejected it in June 2024.
At the time, Brodie voiced concerns about Visa and Mastercard’s “honor all cards” rule, which required merchants to accept all Visa or Mastercard credit cards if they accept any cards from the two networks. The rule has increasingly irked merchants as more and more consumers these days are wielding premium credit cards, which carry a higher interchange fee.
In the latest iteration of the agreement, merchants will be able to choose whether to accept US credit cards in three distinct categories — commercial, premium consumer and standard consumer.
That could have a vast impact on checkout lanes across the country. For instance, it could mean that a consumer with a Sapphire Reserve card from JPMorgan, which carries the Visa Infinite branding and therefore comes with a higher interchange fee, would be turned away from using their card at checkout — while a customer using JPMorgan’s Freedom Unlimited card would be able to make their purchase.
The new agreement will also allow merchants to impose a surcharge on customers who want to use Mastercard and Visa products.
While the reduction in interchange fees could save merchants about $38 billion in the coming years, the vast majority of the estimated savings comes from the networks’ decision to tweak their rules for honoring all cards and surcharging, according to the analysis by Stiglitz and Leffler.
“After more than 20 years of litigation, Visa and Mastercard have reached a proposed settlement with US merchants of all sizes that would provide meaningful relief, more flexibility and options to control how they accept payments from their customers,” Visa said in a statement.
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