This antitrust settlement, one of the largest in US history, aims to address claims that the payment giants charged excessive swipe fees to sellers. If approved by the court, the settlement will put an end to a long-standing litigation that began in 2005.

Merchants have long accused Visa and Mastercard of imposing inflated interchange fees when customers use their credit or debit cards. Unlike American Express, these fees were not allowed to be passed on to the shoppers. Additionally, there have been regulations in place that prohibited directing customers towards lower-cost payment alternatives, known as anti-steering rules.

Under the terms of the settlement, both Visa and Mastercard have agreed to reduce interchange rates in the United States by four basis points. They have also committed to maintaining the current swipe fees for at least the next three years. Furthermore, for a period of five years, the average effective systemwide swipe fee for Visa and Mastercard must be maintained at least seven basis points below the current average rate. In addition to these changes, anti-steering provisions will be removed.

Visa and Mastercard maintain that they have not engaged in any wrongdoing in reaching this settlement. Notably, the agreement does not mandate merchants to pass on these cost savings to consumers. Kim Lawrence, the President of Visa North America, expressed that the settlement addresses the concerns raised by small businesses. Similarly, Rob Beard, the Chief Legal Officer and General Counsel at Mastercard, stated that the settlement provides value and flexibility for business owners in managing card acceptance programs.

Visa estimates that more than 90% of the settling merchants are small businesses. The fee rollbacks and caps alone amount to a staggering $29.79 billion, as stated in court papers. While Visa declined to provide further comment, the settlement is pending final approval by the Eastern District Court of New York. Comment from Mastercard on the matter is yet to be obtained.

Last year, the Manhattan federal appeals court upheld a related $5.6 billion class action settlement against Visa and Mastercard, covering approximately 12 million merchants. However, that settlement did not determine the types of fees these payment networks could impose, and not all retailers were included in it. Economist Joseph Stiglitz, who was hired by the merchants as an expert, has praised the latest agreement, stating that it will significantly enhance merchants' ability to compete on prices and potentially result in substantial savings.

Once the Eastern District Court of New York grants its final approval, this settlement will bring relief to merchants who have long accused Visa and Mastercard of charging excessive fees. With reduced fees and the removal of anti-steering provisions, businesses can anticipate greater flexibility in managing card acceptance programs while potentially passing on savings to consumers.