Visa, Mastercard agree to settlement over swipe fees with merchants

Master Card and Visa signs. (Credit: David McNew/Getty Images)

A landmark antitrust class action settlement has been reached between U.S. merchants and Visa and Mastercard to resolve claims for a lawsuit entitled "In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation." 

The settlement, among the largest in U.S. antitrust history, relates to swipe fees and could deliver shoppers and U.S. merchants billions of near- and long-term savings. 

Swipe fees are paid to Visa, Mastercard and other credit card companies in exchange for enabling transactions. Merchants ultimately pass on those fees to consumers who use credit or debit cards. The fees are calculated as a fixed fee plus a percentage of the sales total, typically about 1% to 3%.

Increasingly, small businesses have begun posting signs near the register warning customers that they will pay more for the same item if they do not use cash.

According to the settlement announced Tuesday, Visa and Mastercard will cap the credit interchange fees into 2030, and the companies must negotiate the fees with merchant buying groups.

Under the proposed settlement terms, the number of transactions eligible to be competitively priced by merchants will increase from less than 20% of transactions to 96%. The law firm, which announced the settlement, put the value of the savings in swipe fees at close to $30 billion.

"By negotiating directly with merchants, we have reached a settlement with meaningful concessions that address true pain points small businesses have identified," Kim Lawrence, the president of North America, Visa, said in a statement. "Importantly, we are making these concessions while also maintaining the safety, security, innovation, protections, rewards and access to credit that are so important to millions of Americans and to our economy."

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The settlement stems from a 2005 lawsuit which alleged that merchants paid excessive fees to accept Visa and Mastercard credit cards, and that Visa and Mastercard and their member banks acted in violation of antitrust laws. 

In 2018 Visa and Mastercard agreed to pay $6.2 billion as part of the long-running suit filed by a group of 19 merchants. But the lawsuit then had two pieces that needed to be resolved: a dispute over the rules Visa and Mastercard imposed to accept their cards, and the merchants who chose not to participate in the settlement.

The settlement is subject to final approval by the Eastern District Court of New York.

In early trading, Visa and Mastercard shares both edged down less than 1%.

This story was reported from Los Angeles. The Associated Press contributed.