$30 billion credit-card deal with Visa, Mastercard is one of the biggest antitrust settlements ever, capping a nearly 20-year fight

Visa Inc. and Mastercard Inc. agreed to waive credit card fees – a deal that US merchants say will save them at least $30 billion over five years – in one of the most important antitrust deals, following a nearly two-decade fight.

The agreement, which must be approved by the court, will also allow retailers to charge consumers more when paying to use Visa or Mastercard credit cards and use pricing strategies to get customers cheaper cards, according to a statement Tuesday from lawyers representing the merchants. .

“This settlement achieves our goal of eliminating anti-competitive restrictions and providing faster and more efficient financing for all US businesses, small and large,” said Robert Eisler, lead counsel for the plaintiffs.

The debate over credit card fees dates back to 2005 – before Visa and Mastercard were both spun off from their bank holdings to become publicly traded companies. These fees, also known as interchanges, are the main profit driver for card-issuing banks and are the main method used to fund popular programs.

In recent years, merchants are increasingly vocal about their opposition to this fee, which is usually around 2% of purchases and more. $100 billion last year. Although Visa and Mastercard set these fees, it is the banks that issue the cards that collect most of the fees.

This means banks included JPMorgan Chase & What., Bank of America Corp. and Citigroup Inc. Visa and Mastercard card issuers can be successful with these partnerships. JPMorgan, the largest U.S. bank, took in $31 billion in exchange-traded funds last year, resulting in a net profit of $4.8 billion after accounting for customer rewards, fees for affiliated companies and other expenses.

Shares of JPMorgan, Bank of America, Citigroup, Visa and Mastercard were all slightly higher at 12:22 pm in New York.

“For years, Visa and Mastercard have been using their duopoly to sell all kinds of wool,” the Retail Industry Leaders Association said. The Trade Groups members including 200 suppliers, manufacturers and distributors, including apple Inc., Dollar value Inc., Starbucks Corp. and Home Depot Inc. ‚ÄúThis settlement is just a drop in the bucket. It confirms that traders should be supported, but whether the proposed terms are sufficient to solve the problems caused by the current exchange needs to be carefully evaluated. “

Stephanie Martz, executive director and general counsel of the National Retail Federation, said her organization is reviewing the proposed regulations.

“The reality is that these fees are unfair trade practices that harm merchants and consumers and benefit banks,” he said in a statement.

Termination Terms

As part of the deal, Visa and Mastercard agreed to reduce the transaction fees they pay each merchant by at least 4 percent for at least three years, the merchants’ lawyers said. And, for five years, the average swipe fee on all these networks should be at least 7 points below the current average, and reviewed by an independent auditor.

Merchants will now be able to charge customers using a Visa or Mastercard card and will be able to adjust their prices based on the cost of accepting different credit cards. This could mean, for example, that a customer with the Chase Sapphire Reserve card, which carries the Visa Infinite logo and therefore comes with a higher exchange rate, will be charged more at checkout than a customer using the Chase Freedom Unlimited card.

This should help address a major problem among merchants who flout Visa and Mastercard’s “honor all cards” policy, which says that if a merchant accepts one of those cards, they must accept all cards of that brand. Some retailers say the rules are responsible for the increase in interest rates in recent years as Visa and Mastercard have worked with banks to issue more cards that run through their machines. premium networkwhich costs a lot of money for retailers.

“This agreement resolves a long-standing dispute by providing certainty and value to business owners, including flexibility in how they manage the acceptance of card programs,” Rob Beard, general counsel and head of global policy at Mastercard, said in a statement. .

Merchants are also now allowed to offer discounts to consumers using cards from a specific bank.

The latest agreement comes five years after Visa and Mastercard agreed to pay nearly $6 billion to millions of merchants, in what was at the time the largest settlement in the US.

Although the agreement covered the financial losses resulting from the case, it did not address the concerns of traders about the exchange and other business practices.

“We’ve come to a solution with the right approval that solves the problems that small businesses have identified,” Kim Lawrence, Visa’s president of North America, said in a statement. “The bottom line, we’re doing this is to maintain safety, security, innovation, security, rewards and access to credit.”

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