The settlement "stems from a 2005 lawsuit which 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," according to the law firm Hilliard Shadowen, which represented the merchants involved in the case.

"This injunctive relief comes after the Second Circuit Court of Appeals finalized and approved the $5.54 billion financial settlement for all members of the US merchant class in March 2023," the business continues.

Swipe fees will be reduced and capped as part of the settlement until 2030. Hilliard Shadowen projects that this will save US retailers $29.79 billion over the course of the next five years.

enhancing one's competitiveness
According to the legal firm, the settlement would also foster a more competitive pricing mechanism for swipe fees and remove "anti-steering restrictions."

It is now possible for merchants to tack on extra fees to transactions made with credit cards issued by Visa or Mastercard. Additionally, they can now give discounts and incentives to clients who utilize credit cards with better charge conditions.

They must provide consumers a clear understanding of the fees that apply when a specially issued card is used. They will be permitted to modify pricing based on the fees linked with the credit card used to complete the transaction.

An historic agreement

A major focus of the initial case was the sense of helplessness merchants had when they had to comply with increasing swipe rates.

The settlement promises "a streamlined process for resolving disputes" and mandates that swipe fees be agreed in "good faith" between the issuer and the retailer.

In order to guarantee that merchants comprehend the whole scope of these new regulations, $15 million has been set aside for a separate program of merchant education. This program will be free of charge for all merchant classes.

The settlement's result was reached after "hard-fought litigation and detailed, painstaking negotiations," according to Steve Shadowen, founding partner of Hilliard Shadowen. It offers "immediate fee relief to merchants as they make these new competitive tools work for them" and "comprehensive market-based solutions to too-high swipe fees."

The settlement "implements tools that will benefit merchants, big and small, while ensuring that the ecosystem remains conducive to the innovation that serves both merchants and consumers," says Linda Nussbaum of Nussbaum Law Group, who also represented the impacted shops.

According to Kim Lawrence, president of Visa North America, the settlement is in favor of "meaningful concessions" that deal with the "true pain points" that various merchant classes have highlighted.

Crucially, we are making these compromises while preserving the safeguards, incentives, safety, security, creativity, and ease of financing that are vital to our economy and to millions of Americans.

Rob Beard, the Chief Legal Officer, General Counsel, and Head of Global Policy at Mastercard, states that the settlement offers "significant assurance and benefit to entrepreneurs, encompassing adaptability in their handling of card program acceptance."