Visa and Mastercard Agree to $30B Antitrust Settlement That Will Reduce Merchant Fees
On March 26, 2024, Visa and Mastercard announced that they had entered into a $30 billion settlement with US merchants stemming from a 2005 lawsuit that accused them and banks that issue their payment cards of violating antitrust laws, causing merchants to pay excessive fees. The settlement needs to be approved by the US District Court, which is not likely to happen before late 2024 or early 2025, and appeals are expected.
This settlement follows a $5.54 billion settlement, stemming from the same 2005 lawsuit, which was finalized and approved by the Second US Circuit Court of Appeals in 2023. The 2023 settlement provides financial payments to merchants who accepted Visa or Mastercard between 2004 and 2019. It did not address all of the issues raised in the 2005 lawsuit, including a dispute over the rules Visa and Mastercard impose to accept their cards. The second settlement, which was just announced in March 2024, if approved, will resolve most of the remaining issues raised in the 2005 lawsuit.
Key provisions of the settlement announced in March 2024 are as follows:
Interchange fee reductions delivering merchants at least $29.79 billion in savings over the next five years.
- Visa and Mastercard will reduce the interchange fee of every merchant by at least four basis points for at least three years
- For a period of five years, Visa and Mastercard will not raise the interchange fees of any merchant above the December 31, 2023 rates, and the average effective systemwide interchange fee for Visa and Mastercard must be at least seven basis points below the current average rate
Removal of anti-steering restrictions and enabling competitive pricing.
- Merchants can surcharge customers for using a Visa or Mastercard credit card, regardless of whether they can surcharge for using American Express cards
- Merchants can steer consumers to more preferred cards, promoting increased competition
- Merchants will be able to adjust prices based on the costs associated with accepting different credit cards, enhancing transparency for consumers
Increasing small merchants’ ability to negotiate lower interchange fees from Visa and Mastercard.
- Small businesses will be able to form merchant buying groups, and negotiate rates with Visa and Mastercard, as large merchants do on their own now
Allocating $15 million for a merchant education program to advise and inform merchants on the settlement.
As part of the settlement, Visa and Mastercard have also agreed to pay up to $170 million of the plaintiffs’ legal fees and expenses.
For more information see: Visa Press Release on Settlement, Mastercard Press Release on Settlement, Hilliard Shadowen Press Release on Settlement.
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