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Visa, Mastercard settle antitrust suit over swipe fees

ASSOCIATED PRESS
                                This April 2005 file photo shows logos for MasterCard and Visa credit cards at the entrance of a New York coffee shop. Visa and MasterCard announced, today, a settlement with U.S. merchants related to swipe fees, a development that could potentially save consumers tens of billions of dollars.

ASSOCIATED PRESS

This April 2005 file photo shows logos for MasterCard and Visa credit cards at the entrance of a New York coffee shop. Visa and MasterCard announced, today, a settlement with U.S. merchants related to swipe fees, a development that could potentially save consumers tens of billions of dollars.

NEW YORK >> Visa and MasterCard announced a settlement with U.S. merchants related to swipe fees that could potentially save American shoppers tens of billions of dollars.

Swipe fees are paid to Visa, Mastercard and other credit card companies in exchange for enabling transactions. Merchants ultimately pass on those fees to consumers who use credit or debit cards. The fees are calculated as a fixed fee plus a percentage of the sales total, typically about 1% to 3%.

Increasingly small businesses have begun posting signs near the register warning customers that they will pay more for the same item if they do not use cash.

According to the settlement announced Tuesday, Visa and Mastercard will cap the credit interchange fees into 2030, and the companies must negotiate the fees with merchant buying groups.

The law firm that announced the settlement put the value of the savings in swipe fees at close to $30 billion.

The settlement stems from a 2005 lawsuit that alleged that merchants paid excessive fees to accept Visa and Mastercard credit cards and that Visa and Mastercard and their member banks acted in violation of antitrust laws.

In 2018 Visa and Mastercard agreed to pay $6.2 billion as part of the long-running suit filed by a group of 19 merchants. But the lawsuit then had two pieces that need to be resolved: a dispute over the rules Visa and Mastercard imposed to accept their cards, and the merchants who chose not to participate in the settlement.

Visa said Tuesday that more than 90% of the merchants in Tuesday’s settlement are small businesses. $15 million of the settlement will be allocated to merchants for education on the rule changes.

Mastercard did not acknowledge any improper conduct, which was part of the settlement, and the changes will take effect after approval of the settlement, most likely in late 2024 or early 2025.

The settlement is subject to final approval by the Eastern District Court of New York.

In early trading, Visa and Mastercard shares both edged down less than 1%.

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