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Visa<\/a> Inc. and Mastercard<\/a> Inc. agreed to cap credit-card swipe fees \u2014 a deal that US merchants say will save them at least $30 billion over five years \u2014 in one of the most significant antitrust settlements ever, following a legal fight that spanned almost two decades.<\/p>\n The deal, which is subject to court approval, also would allow retailers to charge consumers extra at checkout for using Visa or Mastercard credit cards and use pricing tactics to steer customers to lower-cost cards, according to a statement Tuesday from attorneys representing the merchants.<\/p>\n \u201cThis settlement achieves our goal of eliminating anti-competitive restraints and providing immediate and meaningful savings to all US merchants, small and large,\u201d Robert Eisler, co-lead counsel for the plaintiffs, said in the statement.<\/p>\n The legal fight over credit card swipe fees dates back to at least 2005 \u2014 before both Visa and Mastercard were spun off from the banks that owned them to become publicly traded companies. The fees, also known as interchange, are a key driver of profit for card-issuing banks and they are the primary mechanism used to fund popular rewards programs.\u00a0<\/p>\n In recent years, merchants have grown increasingly vocal about their opposition to these fees, which typically amount to about 2% of a purchase and totaled more than\u00a0$100 billion last year<\/a>. While Visa and Mastercard set the level of these fees, it\u2019s the banks that issue the cards that actually collect most of that revenue.\u00a0<\/p>\n That means banks including JPMorgan Chase<\/a> & Co., Bank of America<\/a> Corp. and Citigroup<\/a> Inc. that issue cards with Visa and Mastercard are likely to take a hit with these concessions. JPMorgan, the biggest US bank, collected $31 billion of interchange and merchant processing income last year, leading to total card income of $4.8 billion after it accounted for customer rewards, payments to partner companies and other costs.<\/p>\n Shares of JPMorgan, Bank of America, Citigroup, Visa and Mastercard were all up slightly at 12:22 p.m. in New York.\u00a0<\/p>\n \u201cFor decades, Visa and Mastercard have used their duopoly to fleece retailers of all sizes,\u201d the Retail Industry Leaders Association said in a statement. The trade group\u2019s\u00a0members<\/a>\u00a0include more than 200 retailers, manufacturers and suppliers, including Apple<\/a> Inc., Dollar Tree<\/a> Inc., Starbucks<\/a> Corp. and Home Depot<\/a> Inc. \u201cThis settlement is a mere drop in the bucket. It proves that merchants deserve injunctive relief, but whether the settlement terms proposed are sufficient to remedy the harm caused by the current interchange system needs to be carefully reviewed.\u201d<\/p>\n Stephanie Martz, chief administrative officer and general counsel of the National Retail Federation, said her organization is also reviewing the terms of the settlement.<\/p>\n \u201cThe fact remains that these fees are an unfair business practice that harms merchants and consumers and benefits banks,\u201d she said in a statement.<\/p>\n As part of the settlement, Visa and Mastercard agreed to reduce the swipe fees they charge each merchant by at least 4 basis points for at least three years, lawyers for the retailers said. And, for a period of five years, the average systemwide swipe fee for both networks must be at least 7 basis points below the current average, subject to review by an independent auditor.\u00a0<\/p>\n Retailers will now be able to charge consumers for using a Visa or a Mastercard card and they\u2019ll be able to adjust their prices based on the cost of accepting different credit cards. That could mean, for instance, that a consumer with a Chase Sapphire Reserve card, which carries the Visa Infinite branding and therefore comes with a higher interchange fee, would be charged more at checkout than a customer using a Chase Freedom Unlimited card.<\/p>\n That should help address a pain point among those merchants who despise Visa and Mastercard\u2019s \u201chonor all cards\u201d rules, which stipulate that if a merchant accepts one of the brands\u2019 cards, then it has to accept all of the brands\u2019 cards. Some retailers have said those rules are behind the surge in interchange fees in recent years because Visa and Mastercard have worked with banks to issue more cards that run on their\u00a0premium networks<\/a>, which typically cost retailers more.\u00a0<\/p>\n \u201cThis agreement brings closure to a long-standing dispute by delivering substantial certainty and value to business owners, including flexibility in how they manage acceptance of card programs,\u201d Rob Beard, general counsel and head of global policy at Mastercard, said in a statement.\u00a0<\/p>\n Merchants will also now be allowed to offer discounts to consumers using cards from a certain bank.\u00a0<\/p>\n The latest agreement comes about five years after Visa and Mastercard agreed to pay around $6 billion to millions of merchants, in what was then the largest-ever class-action settlement of a US antitrust case.\u00a0<\/p>\n While that agreement addressed monetary damages associated with the lawsuit, it didn\u2019t resolve the merchants\u2019 concerns about interchange and other business practices.\u00a0<\/p>\n \u201cWe have reached a settlement with meaningful concessions that address true pain points small businesses have identified,\u201d Kim Lawrence, Visa\u2019s president of North America, said in a separate statement. \u201cImportantly, we are making these concessions while also maintaining the safety, security, innovation, protections, rewards and access to credit.\u201d<\/p>\n<\/div>\n\nSettlement Terms<\/h3>\n
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