WASHINGTON — Visa and Mastercard today announced they had reached a revised settlement with merchants over a class-action lawsuit regarding fees that U.S. retailers pay each time a shopper pays with a Visa or Mastercard.
The negotiated settlement, which requires court approval, would end class-action litigation brought by merchants in 2005 accusing Visa, Mastercard and several large banks of engaging in anticompetitive behavior through the use of interchange fees and forcing merchants to an all-or-nothing credit card acceptance policy.
The settlement lowers fees that stores have to pay on credit card transactions but also gives them the option to reject certain ones. Visa and Mastercard would lower credit card interchange fees – which are paid by merchants and are typically between 2% and 2.5% – by an average of 0.1 percentage point a year over "several" years.
The agreement is “all window dressing and no substance,” according to the National Retail Federation (NRF), which is calling on Congress pass legislation to increase competition in the credit card sector.
‘The reduction in swipe fees doesn't begin to go far enough, and the change in the honor-all-cards rule would accomplish nothing," Stephanie Martz, NRF’s chief administrative officer and general counsel, said in a press release issued before the settlement was announced. "If the courts can't fix this, it's time for Congress to take action.”
Thorvardur de Shong
Under the new deal, credit cards could be split into several categories, including rewards cards, non-rewards cards, and commercial cards. Some vendors could choose not to accept rewards cards, which charge them a higher transaction fee.
While stores might decline rewards cards to save money on fees, they would potntially be turning away sales and could diminish their reputation with consumers.
So-called “swipe” fees represent most merchants’ highest operating cost after labor, according to the Merchants Payments Coalition (MPC), a lobbying group advocating for “a more competitive and transparent card system.” The coalition also says the fees are responsible for raising prices paid by the American families.
The coalition complained that the settlement's fee reduction was “minuscule,” and Visa and Mastercard would remain free to raise fees without restrictions once temporary cuts expired.
In March, the parties agreed to a deal that lowered interchange fees by around 0.07 percentage point on average over five years, amounting to about $30 billion in savings for retailers. But a judge rejected the deal as insufficient. The settlement announced today also requires approval from a federal judge.
