In what may be the largest antitrust settlement in U.S. history, Visa Inc., MasterCard Inc. and more than a dozen of the nation’s largest banks have agreed to pay $7.25 billion to deal with retailers’ allegations that they fixed credit and debit card fees.
The fees in question, known as swipe fees or interchange fees, cost retailers 2 percent or more every time a customer purchases something with a credit or debit card. Card companies set these fees, and issuing banks deduct them from each transaction, which passes the cost on to stores that accept the cards, according to the lawsuits.
The parties filed the settlement papers in Brooklyn federal court on Friday. If a judge approves the deal, Visa, MasterCard and the banks will pay $6 billion to a class of retailers, as well as reducing swipe fees on credit and debit cards for eight months to the tune of about $1.2 billion. Merchants will also have the right to negotiate collectively over the fees, though they will have to tell customers about the fees as well. Credit card surcharges will be subject to a cap, except in the 10 states where it is illegal to do so.
MasterCard believes that its interests were “best served by an amicable resolution,” according to Noah Hanft, the company’s general counsel. Craig Wildfang, who represented the plaintiffs, said the agreement “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.”
However, not all parties were in agreement on the merits of the settlement. Tom Robinson, president of one plaintiff organization, the National Association of Convenience Stores, said: “Not only does the proposed settlement fail to introduce competition and transparency, it actually provides Visa and MasterCard with the tools to continue to shield swipe fees from market forces.”
For InsideCounsel coverage of credit card fee squabbles, see below: