Retailers slam Visa, Mastercard settlement on swipe fees

Retail industry groups slammed a proposed settlement announced Tuesday between Visa and Mastercard and a group of merchants, voicing concerns that the deal will provide temporary relief for long-standing complaints about credit card interchange fees.

Visa and Mastercard agreed to reduce and cap credit card interchange fees as part of a landmark antitrust settlement with U.S. merchants, who say the deal could save tens of billions of dollars over the next five years.

“This settlement is the culmination of eight years of hard-fought litigation and detailed, painstaking negotiations,” Hilliard Shadowen LLP’s Steve Shadowen, co-lead counsel for the merchants, said in a statement. “It provides comprehensive market-based solutions to too-high swipe fees, while providing immediate fee relief to merchants as they make these new competitive tools work for them.”

As part of the settlement, which is still subject to approval by the U.S. District Court for the Eastern District of New York, Visa and Mastercard agreed to roll back published “swipe fees” by at least 4 basis points for at least three years.

The credit card companies also agree to not raise fees above their levels at the end of 2023 for the next five years.

Stephanie Martz, the National Retail Federation’s chief administrative officer and general counsel, said there are “some very real concerns” with the proposed settlement.

“The reduction of just a few basis points is within the range that swipe fees have fluctuated over the years and amounts to pennies on the dollar. The fact remains that these fees are an unfair business practice that harms merchants and consumers and benefits banks,” Martz said.

The Retail Industry Leaders Association (RILA) described the deal as “a mere drop in the bucket.”

“It proves that merchants deserve injunctive relief, but whether the settlement terms proposed are sufficient to remedy the harm caused by the current interchange system needs to be carefully reviewed,” the RILA said in a statement.

Visa and Mastercard have said the proposed settlement provides meaningful concessions that will benefit merchants.

“By negotiating directly with merchants, we have reached a settlement with meaningful concessions that address true pain points small businesses have identified,” Kim Lawrence, Visa’s North America president, said in a statement.

Rob Beard, Mastercard’s chief legal officer, said the “agreement brings closure to a long-standing dispute by delivering substantial certainty and value to business owners, including flexibility in how they manage acceptance of card programs.”

These changes could save merchants at least $29.8 billion over the next five years, according to a statement issued by Shadowen and the other lawyers representing the merchants.

But Doug Kantor, general counsel at the National Association of Convenience Stores, told The Hill that the settlement would provide “very tiny and temporary relief” and “tries to cut off every other merchant with a lawsuit from being able to ask for more.”

“This is a very small group of lawyers who did not consult the broader universe of merchants that they were supposed to represent out there and just dropped this on everyone without taking into account the fact that merchants aren’t gonna like it, and there’s likely to be a lot of opposition to it,” Kantor said.

Instead, Kantor said there needs to be “a real market with real market forces” to bring price competition in the interchange market, referencing the ongoing lobbying fight on Capitol Hill over how to create more competition within the credit card interchange fee market.

Last summer, Sens. Dick Durbin (D-Ill.) and Roger Marshall (R-Kan.) reintroduced the Credit Card Competition Act, which would require massive financial institutions — defined as those with more than $100 billion in assets — to enable at least two network options for processing credit card transactions.

At least one of those must be an option other than Visa or Mastercard, which dominate around 80 percent of the credit card interchange market in the U.S.

Sen. Thom Tillis (R-N.C.) celebrated the proposed settlement as an “important solution” in a post on X, the platform formerly known as Twitter.

“With all parties having agreed, there is no reason for Congress to intervene with ill-advised legislation like the Credit Card Competition Act,” Tillis wrote.

In another post, Sen. Bill Hagerty (R-Tenn.) similarly said the “settlement only strengthens the case against government interference in payment networks” and called on Congress to “respect the decisions of merchants and card companies and put unnecessary policy interventions to rest.”

But the RILA said the proposed settlement announced Tuesday “in no way removes the responsibility of Congress to fix an anticompetitive credit card market.”

“Congress should complete the mission and pass the Credit Card Competition Act to bring true competition to a broken market,” the association said.

Retailers have been rallying support for the bill against opposition from the Electronic Payments Coalition (EPC), the trade group representing Visa, Mastercard and other credit card and union giants.

Richard Hunt, the EPC’s executive chair, said in response to the settlement that Durbin’s bill “continues to be unnecessary.”

“The agreement helps small businesses more than a haphazard, experimental piece of legislation that only benefits the largest corporate mega-stores ever would. Congress should put an end to the ill-advised Durbin-Marshall mandates and let the agreement merchants reached stand on its own,” Hunt said.

Kantor, who characterized the settlement as “Visa and MasterCard using the legal process as a sword and a shield to cut down other merchant claims,” disagrees.

“The best way to deal with this is for Congress to step in and make clear that there ought to be a competitive market,” Kantor said.

Updated at 1:26 p.m. EDT