Despite protests by major retailers including Starbucks and Lowe’s, a $7.2 billion settlement offer by Visa and MasterCard was given preliminary approval by U.S. Court Judge John Gleeson.
The case between MasterCard and Visa and the merchants who are suing them for antitrust violations has been going on for seven years. Retailers claim that steep interchange fees charged by the credit card networks are draining profits and strangling businesses.
Interchange fees, commonly known as swipe fees, are the processing fees charged to retailers. They are usually about 2% of the purchase price. Merchants say they pay billions in swipe fees each year.
Biggest Antitrust Settlement
Even though it would be the largest antitrust settlement ever, merchants lined up in protest when it was announced in July. The National Retail Federation, Walmart, and Target, none of them a party to the proceedings, stepped in to support other retailers who brought the suit and protested the settlement offer.
Other plaintiffs, including grocery chains Safeway and Kroger, supported the settlement. “It will begin to produce real competition in the payments business and potentially lower costs for all consumers,” according to Safeway’s senior vice-president of finance, Melissa Plaisance.
Will Customers Pay?
Customers might not find the settlement so reasonable if merchants pass some or all of the interchange fees on to them, which the settlement would allow them to do. If that happens, consumers might have an incentive to use cash instead of credit cards for more purchases – something that retailers who support the settlement have called a good development. Kroger, Safeway, and others in favor of the settlement say that it will raise awareness and improve retailer-customer communication.