Visa and Mastercard announced on Monday (November 10th) that they have reached a new agreement with merchants regarding swipe fees, putting an end to a 20-year-long antitrust lawsuit. However, some business groups have opposed this agreement, arguing that the new deal fails to address the core issues and is similar to the $30 billion settlement rejected by the court last year.
This lawsuit originated twenty years ago when merchants accused Visa, Mastercard, and several banks of violating the U.S. Antitrust laws by charging high swipe fees through credit card networks. In June last year, Federal Judge Margo Brodie of Brooklyn, New York, rejected the $30 billion settlement due to its inadequate compensation amount.
The new settlement agreement still needs approval from Judge Brodie to take effect. Organizations such as the National Retail Federation (NRF) and the Merchants Payments Coalition have expressed opposition to the new agreement, as they believe that businesses will still have to pay high fees, especially when accepting dominant high-rewards credit cards in the market.
These credit cards offering generous rewards, such as cashback, travel points, discounts at specific merchants, and other benefits, often attract a large number of consumers. However, accepting these cards means that merchants have to pay higher swipe fees.
According to NRF data, the total amount of swipe fees in the United States reached $111.2 billion in 2024, up by approximately 10% from $100.8 billion in 2023, making it four times higher than in 2009.
Under the new settlement agreement, Visa and Mastercard will decrease swipe fees (currently ranging from 2% to 2.5%) by 0.1 percentage points for five years.
The new agreement allows merchants to choose whether to accept specific categories of credit cards, including business cards, high-end consumer cards (including many rewards cards), and standard consumer cards.
The rate for standard consumer cards will be capped at 1.25% over eight years, representing a reduction of over 25% compared to the current rate. Furthermore, merchants will have more flexibility to charge additional fees when customers use bank cards for payments.
Although the total settlement amount has not been disclosed yet, it is expected to exceed $30 billion. Visa stated that the new scheme provides real relief and more flexibility for businesses of all sizes, while Mastercard mentioned that small businesses will benefit from greater flexibility, lower costs, and simplified rules.
The previous proposed settlement solution aimed to reduce swipe fees by approximately 0.07 percentage points over five years and provide merchants with more room to charge additional fees.
Nevertheless, that settlement agreement was rejected by Judge Brodie, who stated that the swipe fees would remain higher than they should be in a non-antitrust scenario (without market manipulation or restricted competition leading to high costs). She also pointed out that the $6 billion in annual savings for merchants under the settlement was insignificant compared to the fees Visa and Mastercard could still charge.
She criticized the previous agreement for enforcing the “Honor All Cards rule,” requiring merchants to either accept all Visa and Mastercard cards or none at all. Additionally, merchants have long criticized Visa and Mastercard for enforcing the “anti-steering” rules that prevent them from guiding customers to use lower-cost payment methods.
The Electronic Payments Coalition, representing the banking industry and card issuers, supports the new settlement agreement. Its executive director, Richard Hunt, stated that the plan could keep swipe fees lower than the standards proposed by Senators Richard Durbin (D-Illinois) and Roger Marshall (R-Kansas).
However, Doug Kantor, general counsel of the National Association of Convenience Stores (NACS), criticized the agreement for not incentivizing banks to lower their rates but instead allowing Visa and Mastercard to potentially raise fees without restrictions in the future.
If Judge Brodie approves this new agreement, the two-decade-long battle over swipe fees will come to an end. However, whether there will be a real change in the structure of credit card fees for merchants and consumers remains to be seen.