Visa and Mastercard Near Historic Settlement to End 20-Year Legal Battle
Visa and Mastercard are reportedly finalizing a landmark settlement with merchants that would significantly reduce credit card interchange fees and allow stores to refuse certain cards, potentially ending a two-decade legal dispute.
Key Takeaways
- Interchange fees could drop from 2-2.5% to around 0.1%
- Merchants gain right to refuse specific credit cards
- Settlement would resolve 20-year antitrust lawsuit
- Court approval still required for implementation
According to Wall Street Journal sources, the credit card giants plan to lower interchange fees—currently averaging 2-2.5%—to approximately one-tenth of a percentage point over time. They would also eliminate rules requiring merchants accepting one network card to accept all cards from that network.
The settlement is expected to be announced soon, though court approval remains necessary for implementation.
New Card Acceptance Rules
Under the proposed agreement, merchants could selectively accept cards based on categories: rewards credit cards, non-rewards cards, and commercial cards. For instance, a store accepting basic Visa cards could refuse premium Visa rewards cards.
Background of the Legal Dispute
The conflict began in 2005 when merchants sued Visa, Mastercard and major banks, alleging anticompetitive practices through interchange fees and acceptance terms.
Last year, both companies agreed to reduce fees by approximately 0.07 percentage points over five years, providing merchants flexibility to impose surcharges. However, the court rejected that deal. The current settlement discussions may include surcharging provisions.
Challenges and Industry Impact
The case faces complications from divided legal representation among merchant groups. Tensions have escalated over 20 years as interchange and other fees increased substantially.
Rewards cards remain particularly contentious since consumer benefits like points and cashback are partially funded by higher merchant fees. Currently, merchants cannot refuse premium rewards cards if they accept other cards from the same network.
Consumers have felt the dispute’s impact through surcharges as merchants pass along fee costs. Banks collected $72 billion in interchange fees according to Nilson Report data cited in the Journal.
While the settlement would reduce some fees temporarily, other charges have continued growing over time.
