Visa, Mastercard agree to $30 billion merchant fee settlement

Visa-Mastercard agreement: Visa and Mastercard have reached a settlement estimated at $30 billion, aimed at curbing credit and debit card fees for merchants. The move is expected to potentially translate into savings for consumers through reduced prices.

The settlement, subject to court approval, marks one of the largest antitrust settlements in US history, effectively addressing claims dating back to litigation initiated in 2005.

Merchants have long criticised Visa and Mastercard for what they perceive as exorbitant swipe fees, also known as interchange fees, charged to customers using credit or debit cards. Additionally, merchants have objected to "anti-steering" rules preventing them from directing customers towards more cost-effective payment methods.

Under the terms of the settlement unveiled on Tuesday, Visa and Mastercard have agreed to slash interchange rates by four basis points (0.04 percentage points) within the United States for a period of three years. Furthermore, the rates will be capped for five years. Notably, both card networks have committed to eliminating anti-steering provisions, although they deny any wrongdoing as part of the settlement agreement.

According to court documents, the fee reductions and caps alone represent a significant value of $29.79 billion. Visa has estimated that the majority of the settling merchants, exceeding 90 per cent, consist of small businesses.

Renowned economist Joseph Stiglitz, enlisted by the merchants as an expert, expressed optimism about the settlement's implications. Stiglitz said that the agreement substantially enhances merchants' ability to compete based on prices, potentially resulting in considerable cost savings. He highlighted the likelihood of these savings being passed on to consumers in the form of lower prices.

In a separate development last March, the federal appeals court in Manhattan upheld a related $5.6 billion class-action settlement by Visa and Mastercard, benefiting approximately 12 million merchants. However, this previous settlement did not address the specifics of the fees imposed by Visa and Mastercard, and certain retailers were not covered by its provisions.

(With Reuters inputs)