Visa and Mastercard Reach New ‘Swipe Fees’ Settlement
News Summary
Visa and Mastercard have announced an updated settlement in a 20-year legal battle with merchants over “swipe fees.” The agreement, which still requires approval from the Eastern District Court of New York, addresses accusations dating back to 2005 that the two companies and larger banks colluded to violate U.S. monopoly laws through the card companies’ collection of interchange fees. Under the terms, Visa and Mastercard will reduce interchange fees by 0.1 percentage points for five years. Merchants will gain more flexibility, permitted to choose whether they accept U.S. cards in certain categories (including commercial, premium consumer, and standard consumer cards), and standard consumer rates will be capped at 1.25%. Additionally, merchants will have more freedom to impose surcharges on credit card users. The settlement also includes the creation of a “merchant education program about payment acceptance and cost management.” While both companies lauded the agreement as the best resolution for all parties, not all merchants are pleased. The Merchants Payments Coalition called the fee reduction “minuscule” and expressed concerns that Visa and Mastercard would be free to raise fees without restrictions after the temporary cuts expire. The coalition also noted that merchants have “no choice” but to accept rewards cards, which constitute 85% of all cards issued.
Background
This two-decade-long legal battle originated in 2005 when U.S. merchants accused Visa, Mastercard, and major banks of colluding to violate U.S. monopoly laws through their collection of interchange fees, commonly known as “swipe fees.” These fees are paid by merchants to issuing banks and card networks for processing credit card transactions, typically ranging from 2% to 2.5% of the transaction value. A previous settlement attempt in 2024 between the card companies and the plaintiffs was ultimately rejected by a judge, who deemed the deal “inadequate.” This highlights the complexity of the case and the ongoing determination of merchants to secure more significant fee adjustments. This new settlement represents the latest effort to resolve the protracted dispute following the failure of the prior agreement.
In-Depth AI Insights
What are the strategic implications of this settlement for Visa and Mastercard's core business model beyond the nominal fee reduction? - On the surface, a 0.1 percentage point fee reduction over five years might seem modest, but its core significance lies in alleviating long-standing antitrust and regulatory pressures. By making a proactive concession, both companies aim to preempt potentially harsher future legislation or court rulings, thus preserving their overall control over the payment ecosystem. - This