US merchants reach landmark settlement with Visa and Mastercard to lower swipe fees
Mastercard and Visa have reached a landmark settlement with merchants in the US that will see credit interchange rates lowered and capped for the next five years.
US merchants settle lawsuit with Visa and Mastercard
Law firm Hilliard Shadowen, which represented the merchants involved in the case, says that 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”.
“This injunctive relief follows the $5.54 billion financial settlement for all US merchant class members which was finalised and approved by the Second Circuit Court of Appeals in March 2023,” the firm adds.
The settlement will see swipe fees lowered and capped until 2030, which Hilliard Shadowen estimates will result in $29.79 billion in savings for US merchants over the next five years.
Sharpening the competitive edge
The law firm says the settlement will also eliminate “anti-steering restrictions” and cultivate a more competitive pricing model for swipe fees.
Merchants will now have the ability to add additional charges to transactions completed with Visa or Mastercard-issued credit cards. They will now also be able to provide customers with incentives and discounts to use credit cards with more favourable fee terms.
They will be able to adjust prices based on the fees associated with the credit card used to complete the transaction, and will need to provide customers with a transparent view of what charges apply when a specifically-issued card is used.
A landmark settlement
Much of the original lawsuit centred around the loss of control merchants felt when needing to abide by rising swipe rates.
The settlement says swipe fees must now be negotiated in “good faith” between the issuer and the merchant, while also promising “a streamlined process for resolving disputes”.
To ensure that merchants are fully able to grasp the extent of these new measures, $15 million has been allocated for an independent merchant education programme, which will be available to all merchant classes free of charge.
Commenting on the outcome of the settlement, Steve Shadowen, founding partner at Hilliard Shadowen, says it is the outcome of “hard-fought litigation and detailed, painstaking negotiations”, providing “comprehensive market-based solutions to too-high swipe fees” and “immediate fee relief to merchants as they make these new competitive tools work for them”.
Linda Nussbaum of Nussbaum Law Group, which also represented the affected merchants, adds that the settlement “implements tools that will benefit merchants, big and small, while ensuring that the ecosystem remains conducive to the innovation that serves both merchants and consumers”.
Kim Lawrence, president of North America for Visa, says the settlement supports “meaningful concessions” that address the “true pain points” identified by different merchant classes.
“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.”
Rob Beard, chief legal officer, general counsel and head of global policy at Mastercard, comments that the settlement delivers “substantial certainty and value to business owners, including flexibility in how they manage acceptance of card programmes”.
