Merchants Reach $7B Deal on Swipe Fees with Visa, MasterCard, Big Banks

Visa, MasterCard and some of the top U.S. banks have reached a $7.25 billion settlement on behalf of about seven million U.S. merchants who charged price-fixing among the issuers of credit cards and debit cards.
The settlement is a long-sought victory for retailers against alleged anti-competitive practices in the “swipe fees” – also known as interchange fees – they are charged by the two card networks and the card-issuing banks, including JPMorgan Chase, Bank of America, Citibank, Wells Fargo, Capital One and others.
The lawyers representing the merchants say they expect the settlement’s reforms to put pressure on Visa and MasterCard to limit or reduce interchange fees, resulting in lower prices for consumers.
According to the law firm representing the merchants, the settlement that has resolved the seven-year-old case is believed to be the largest ever private antitrust case under the U.S. Sherman Act.
The $7.25 billion amounts to a two-phase payment for alleged past damages of $6.05 billion up front for damages, and a further payment representing the value to merchants of a temporary reduction in the level of interchange “swipe” fees.
That value is put at $1.2 billion in reduced payments by merchants on Visa and MasterCard credit and debit card transactions, according to the merchants’ law firm, Robins, Kaplan, Miller & Ciresi L.L.P.
“We believe settling this case is in the best interests of all parties,” said Joseph W. Saunders, chairman and CEO of Visa Inc., the world’s largest payments network, in a statement. “We are comfortable with the terms, which we do not anticipate will impact our current guidance. Visa is well positioned to help drive the migration to electronic payments in the U.S. and globally.”
The settlement terms include  reforms of Visa and MasterCard rules and business practices, including modifications of network rules previously enforced by Visa and MasterCard relating to activity at the point-of-sale.
The modifications enable merchants to provide greater transparency to consumers regarding the cost of using various types of payment methods, and permitting merchants to negotiate collectively over interchange fees and other aspects of their relationships with Visa and MasterCard.
It is expected that the reforms required by the settlement will enable merchants to put pressure on Visa and MasterCard to limit or reduce interchange fees, among other things, the merchants’ law firm said.
“The reforms achieved by this case and in this settlement will help shift the competitive balance from one formerly dominated by the banks which controlled the card networks to the side of merchants and consumers,” said K. Craig Wildfang, who led the case for the merchants as co-lead counsel and partner at Robins, Kaplan, Miller & Ciresi L.L.P. “Over time, the reforms induced by this case and in this settlement should help reduce card-acceptance costs to merchants, which in turn, will result in lower prices for all consumers.”

Leave a Reply

Your email address will not be published. Required fields are marked *