Visa and Mastercard strike deal to lower merchant fees
By Gordon Ebanks, CNN
(CNN) — Visa and Mastercard have struck a deal with retailers that would lower fees for merchants, potentially lowering prices but threatening prized consumer rewards.
The two credit card giants have been entangled in a lawsuit brought by retailers for the last 20 years that alleged the companies have fixed the price of interchange fees — a large portion of the fees merchants pay when a customer makes a purchase with a credit card. The companies were close to reaching a settlement last year, but U.S. District Judge Margo K. Brodie rejected the $30 billion proposal.
The proposal announced this morning would see the two companies bring down interchange fees by 0.1% over the next five years, give merchants the choice to add surcharges when customers pay with credit cards as well as the option to refuse premium cards, which often charge substantially higher fees.
Retailers have long chafed at the fees credit card companies charge to merchants. Fees charged to retailers when customers swipe their cards have increased nearly 70% since the onset of the Covid-19 pandemic, according to the National Association of Convenience Stores, which cited data from Nilson.
The deal, which is still subject to court approval, could mean big changes for businesses and consumers.
“After more than 20 years of litigation, Visa and Mastercard have reached a proposed settlement with U.S. merchants of all sizes that would provide meaningful relief, more flexibility and options to control how they accept payments from their customers,” Visa told CNN.
Mastercard said that “smaller merchants will gain in this settlement – more acceptance choices, reduced costs and simplified rules.”
The proposal from Visa and Mastercard specifically states that the deal is not an admission of wrongdoing.
The National Retail Federation, a powerful trade group representing retailers, called the proposal “window dressing.” A press release issued in response to reports of the proposal said the reduction in interchange fees doesn’t go far enough to address the rise in interchange fees, which they say average around 2.35%.
“If the courts can’t fix this, it’s time for Congress to take action,” said the National Retail Federation’s General Counsel Stephanie Martz.
This is a developing story and will be updated.
The-CNN-Wire
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