MasterCard, Visa and several major banks agreed to pay $6 billion to settle a lawsuit involving 7 million merchants that accept both MasterCard and Visa. The deal consists of a little more than $6 billion in cash for damages.
Visa will pay $4.4 billion and MasterCard will pay $790 million. The credit card companies agreed to decrease their swipe fees for eight months. The fee is paid by businesses for card transactions they process. The temporary fee discount is estimated to cost around $1.2 billion.
Lawyers who were part of the case said that it was the largest antitrust settlement in history. Most major banks in the United States were defendants in the case. The merchants include grocery chains Kroger and Safeway, online shopping network QVC, and the Rite Aid drugstore chain.
The antitrust case was filed in 2005. The retailers claimed that the card issuers and banks conspired to fix the fees the stores have to pay credit and debit cards, which was around 2 percent of the price of the purchase.
Consumers are affected by the settlement as well. As part of the settlement, Visa and MasterCard will change their rules to allow retailers to implement a surcharge for customers paying with a credit card, which are more expensive transactions for merchants to process because they aren’t subject to the caps on interchange fees imposed by the Durbin Amendment.
The Durbin Amendment was enacted in 2010 as part of the financial markets overhaul. It lowered the swipe fee charged to merchants when they accept debit cards from customers. Banks lost revenue from not being about to charge as much for those type of transaction. Retailers said that the fee they’re charged now is still expensive.
According to a retail group, the agreement may only be a short term fix in the ongoing battle between banks, merchants and card issuers over swipe fees. The National Retail Federation general counsel Mallory Duncan said that the rule changes don’t lead to true transparency and competition.