'Very small relief' seen from antitrust class-action accord

WASHINGTON – A proposed agreement that would reduce “swipe” fees that retailers pay each time a shopper pays with a Visa or Mastercard is “a bad deal for merchants,” according to the Merchants Payments Coalition (MPC), a lobbying group advocating for a more competitive and transparent card system.

The coalition is expressing its disappointment with a landmark antitrust class action settlement reached March 26 between U.S. merchants and Visa Inc. and Mastercard Inc. to resolve claims for injunctive relief.

Under the proposed settlement, Visa and Mastercard would lower credit card swipe fees – which currently average 2.26% of the transaction amount – by at least four basis points for at least three years. For five years, swipe fees would not increase above rates that existed at the end of 2023, and the average rate would be at least seven basis points below the current average

“A few years of very small relief followed by business as usual is not a good outcome from 20 years of litigation,” Christopher Jones, an MPC executive committee member and senior vice president of government relations at the National Grocers Association, said in a statement.

Added Jones, “The settlement does nothing to actually bring competitive market forces to swipe fees or change the behavior of a cartel that centrally fixes rates and bars competition. Instead, it tries to provide token, temporary relief and then allows the card companies to raise rates yet again. Congress needs to act so that we will have real reform that will benefit merchants and their customers.”

The average swipe fee rate has increased from 2.02% in 2010 to last year’s 2.26%, said Jones, citing Nilson Report data. Collectively, Visa and Mastercard fees totaled $100.7 billion in 2023, he said.

Swipe fees represent most merchants’ highest operating cost after labor, according to MPC, which said the fees are responsible for increasing prices paid by the average family by more than $1,000 a year.

The March 16 settlement proposal comes as Senate Judiciary Committee Chairman Richard Durbin, a Democrat of Illinois, pledged to convene a hearing on competition within the card industry. Durbin is a lead sponsor of the Credit Card Competition Act, first introduced in the Senate in 2022. The act would require that banks with at least $100 billion in assets enable cards they issue to be processed over at least two unaffiliated networks – Visa or Mastercard plus a competitor like NYCE, Star, Shazam or Discover, potentially saving U.S. businesses and consumers billions of dollars each year.

Banks would choose which networks to enable but merchants would then decide which to use, resulting in competition over fees, security, and service.