Visa and Mastercard Reach $38 Billion Settlement in Antitrust Lawsuit

Historic Agreement Ends Two-Decade Legal Battle

Visa and Mastercard have agreed to a landmark $38 billion settlement to resolve a long-standing antitrust lawsuit filed by US merchants. The litigation, which has spanned two decades, centered on allegations that the payment giants and major banks colluded to maintain excessive interchange fees, also known as swipe fees.

Key Terms of the Settlement

The new agreement includes several significant concessions by Visa and Mastercard:

1. Reduced Interchange Fees: Average swipe fees will be lowered by 0.1% for the next five years
2. Rate Caps: Consumer card interchange rates will be capped at 1.25% for the next eight years, representing a reduction of over 25% from previous levels
3. Merchant Flexibility: Businesses will have greater freedom to:
   • Choose which card types to accept
   • Impose surcharges up to 3% on credit card transactions

Industry Reaction and Implications

While the settlement represents a significant development, it has received mixed reactions from industry stakeholders. The National Retail Federation (NRF) has expressed concerns that the proposed fee structure remains too high, particularly for reward cards popular among consumers. Stephanie Martz, NRF's General Counsel, noted that merchants cannot afford to reject the 80% of customers who use credit cards.

Economic Impact Analysis

Experts predict that the settlement could lead to substantial savings for merchants. Economists Joseph Stiglitz and Keith Leffler estimate that the changes could result in $38 billion in savings by 2031. The agreement is expected to foster greater competition in the payment processing industry and potentially benefit consumers through lower prices or improved services.

Historical Context

The interchange fee controversy has been ongoing for years, with total swipe fees paid by US merchants reaching $111.2 billion in 2024, up from $100.8 billion in 2023. This figure is four times higher than the amount paid in 2009, highlighting the growing significance of card transaction fees in merchant expenses.