Visa and Mastercard, along with the banks associated with them, have reached a settlement in a long-standing antitrust case initiated by merchants, marking a significant development in the ongoing legal saga.
The settlement, disclosed in a press release on Tuesday morning, is anticipated to reduce swipe fees paid by merchants when customers utilize Visa or Mastercard for purchases, amounting to a $30 billion decrease over a span of five years.
Swipe fees, typically around 2% of the transaction value, can escalate to 4% for premium rewards cards, according to the National Retail Federation.
Under the terms of the settlement, these fees would see a reduction of at least 0.04 percentage points for a minimum of three years. Moreover, Visa and Mastercard are obligated to maintain the swipe fee rates effective as of December 31, 2023, for a duration of five years.
While this settlement appears to offer relief to merchants, concerns have been raised by the National Retail Federation regarding its efficacy.
Stephanie Martz, the NRF’s chief administrative officer and general counsel, expressed skepticism, emphasizing that the potential savings for merchants would be minimal and insufficient to address the underlying issue of unfair business practices benefiting banks at the expense of merchants and consumers.
The settlement may pave the way for merchants to impose surcharges on customers based on the type of Visa or Mastercard used, potentially affecting cardholders receiving rewards such as cashback and airline miles.
Conversely, some cardholders might benefit from discounts on goods and services, as merchants could negotiate preferential deals with banks for the use of specific cards.
Visa and Mastercard have reassured cardholders that the settlement would not affect existing rewards programs or access to credit.
However, analyst Jaret Seiberg suggests that the settlement may pose challenges for credit card rewards and smaller banks, as merchants may favor preferred credit cards, potentially disadvantaging smaller financial institutions.
Meanwhile, amid the settlement discussions, bipartisan lawmakers are pushing for legislative reforms aimed at addressing Visa’s and Mastercard’s dominance.
Although these legislative efforts continue, Representative Patrick McHenry has commended the settlement as a practical step forward, highlighting its potential impact.
