Visa, Mastercard $6 Billion Monumental Settlement

In Press Releases on July 23, 2012 at 12:22 pm

ROSEMONT, IL (23 July 2012)—In the largest antitrust litigation case in U.S. history, Visa, MasterCard and other card issuing banks have agreed to create a $6.05 billion fund (minus several million for lawyers’ fees and expenses) to be made available to businesses that claim Visa and MasterCard constrained competition by setting unreasonably high swipe fees.

In 2005, major retailers in the U.S. filed lawsuits against Visa and MasterCard, accusing them of price fixing in setting interchange fees.  The settlement reached this month now allows businesses to impose new fees for customers choosing to pay with credit cards.  If merchants decide to impose the surcharge, notice of the additional fee must be clearly displayed at both the entrance and the register.  The surcharges businesses can impose must be between 1 and 3 percent of the purchase, roughly the charge of swipe fees.

Merchants with businesses in California, Texas, New York, or seven other states[1], will not be able to charge the extra check out fee due to previous regulation banning surcharges, but these merchants can still benefit from the overall settlement.  A top benefit being the ability for the businesses to negotiate fees with card networks and banks, making it easier for them to negotiate lower fees for themselves.

The settlement requires Visa and MasterCard to create the $6.05 billion fund, most of which will most likely go to the larger retailers that paid more in swipe fees over the past nine years.  Smaller merchants that were plaintiffs in the case may see up to a couple hundred dollars in return from the settlement.

According to Forbes, the settlement also cuts interchange fees by 10 basis points across the board for eight months, but after that the credit card companies can resort to their old fee structure, with an additional benefit:  a broad release from any further litigation over the facts alleged in this case.

Many merchants are upset with the settlement, stating that this does nothing to ensure long-term security against price-fixing, and only further reinforces a broken market model.   They argue the settlement does not go far enough to protect business owners from unfair practices by credit card companies.  After the eight months of swipe fee relief, the rates are anticipated to return to normal, leaving small businesses in a difficult financial position.

Should you implement the additional surcharge? How some merchants are weighing the decision to impose the ‘swipe’ fee surcharge.

Kim Foster
Marketing Manager | TransNational Bankcard
9600 W. Bryn Mawr, 6th Floor
Rosemont, IL 60018

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