Visa and Mastercard reached an estimated $30 billion settlement to limit credit and debit card fees for merchants, with some savings likely to be passed on to consumers through lower prices.
The antitrust settlement is one of the largest in U.S.
history, and upon court approval would resolve claims in litigation that began
in 2005.
Merchants have long accused Visa and Mastercard of charging
inflated swipe fees, or interchange fees, when shoppers used credit or debit
cards, and barring them through “anti-steering” rules from directing customers
toward cheaper means of payment.
Under the settlement announced on Tuesday, Visa and
Mastercard will reduce interchange rates by four basis points (0.04 percentage
points) in the United States for three years, and cap rates for five years.
Both card networks also agreed to remove anti-steering
provisions. They denied wrongdoing in agreeing to settle.
The fee rollbacks and caps alone are worth $29.79 billion,
according to court papers, and Visa estimated that small businesses comprise
more than 90% of the settling merchants.
Joseph Stiglitz, a Nobel Prize-winning economist hired by
the merchants as an expert, in an affidavit said the settlement “greatly
enhances merchants’ freedom to steer customers using the linchpin of
competition--prices,” and could lead to “very substantial” savings for
merchants.
“Competition among merchants results in these cost savings
being passed on to customers in the form of lower prices,” Stiglitz added.
Last March, the federal appeals court in Manhattan upheld a
related $5.6 billion class-action settlement by Visa and Mastercard and covered
about 12 million merchants.
That settlement did not resolve what kinds of fees Visa and Mastercard could impose, and not all retailers were covered by it.
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