Visa Inc. (NYSE: V) and Mastercard Incorporated (NYSE: MA) have reached a landmark antitrust class action settlement with U.S. merchants.
Subject to approval by the U.S. District Court for the Eastern District of New York, the settlement is one of the largest in U.S. antitrust history, according to a statement.
The settlement aims to resolve claims for injunctive relief in "In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation."
"The Settlement Agreement opens competitive doors that have been closed for decades, while providing rate relief to every merchant that accepts Visa or Mastercard credit cards," said Nobel laureate economist Dr. Joseph Stiglitz, who submitted a declaration on the settlement and its effects.
The class includes all merchants who accepted Visa or Mastercard debit or credit cards in the U.S. at any time during the period between December 18, 2020, and the date of entry of final judgment by the court.
At least $29.79 billion in savings will be realized in the five years following approval of the settlement from agreed-upon caps and rollbacks on credit card processing fees, or "swipe fees."
Merchants have become more outspoken in recent years against these fees, averaging around 2% per purchase and totaling over $100 billion last year, Bloomberg reported.
Visa and Mastercard determine the fee levels, but it's the banks issuing the cards, such as JP Morgan Chase & Co. (NYSE: JPM), Bank Of America Corporation (NYSE: BAC), and Citigroup, Inc. (NYSE: C), that primarily benefit from the revenue.
Last year, JPMorgan, the largest U.S. bank, earned $31 billion from interchange and merchant processing, resulting in $4.8 billion in card income after factoring in customer rewards, payments to partners, and other expenses, Bloomberg added.
As a part of the settlement, Visa and Mastercard will roll back the posted swipe fee of every merchant by at least four basis points for at least three years.
For a period of five years, Visa and Mastercard will not raise the swipe fees of any merchant above the posted rates that existed as of December 31, 2023.
For a period of five years, the average effective systemwide swipe fee for Visa and Mastercard must be at least seven basis points below the current average rate. An independent auditor will verify the calculations.
"By negotiating directly with merchants, we have reached a settlement with meaningful concessions that address true pain points small businesses have identified," said Kim Lawrence, President, North America, Visa, in a press release.
"Importantly, we are making these concessions while also maintaining the safety, security, innovation, protections, rewards and access to credit that are so important to millions of Americans and to our economy."
Price Action: V shares are trading higher by 0.46% to $282.49 on the last check Tuesday.