Visa, Mastercard Settle on 2005 Class Action Antitrust Lawsuit

Great news: Visa and Mastercard recently announced a settlement to the 2005 class action antitrust lawsuit on behalf of 7 million retailers that accept credit and debit cards with their brands. As part of the proposed deal they have agreed to lower the fees that businesses pay for card transactions! In addition, merchants would be able to charge their customers who pay with a credit or debit card more than for cash sales, which was previously prohibited. The agreement is still contingent upon approval by a federal judge, and it is unclear exactly who and how much would receive any settlement payments.

This settlement does however propose a 10 basis point reduction in industry costs. Fortunately any merchant that is with us and priced on a “pass-though” basis, which is our pricing model, will benefit from any industry reduction, including this one.  Unfortunately merchants with other merchant services providers are most likely on a “tiered” model, where those providers would probably not reduce their rates and just pocket the difference themselves. As for the second part of the settlement which allows passing processing fees on to consumers, many merchants probably would not opt to do this as it could just alienate customers.

So while the purpose of this settlement reflects the intent to break the monopoly and price fixing policies of the large banks (who are the members and rule makers of the Visa and Mastercard Card Association), the net results offer no benefit to consumers and very little relief from existing costs to merchants. This is much like the Durbin amendment that reduced debit fees last year, only to have that reduction not passed on, and banks finding other fees to charge. In our opinion though, the acknowledgement of unfair and unethical business practices it is a step in the right direction.

What do you think?

Visa and Mastercard recently announced a settlement to the 2005 class action antitrust lawsuit on behalf of 7 million retailers that accept credit and debit cards with their brands.  As part of the proposed deal they have agreed to lower the fees that businesses pay for card transactions!  In addition, merchants would be able to charge their card-paying customers more for non-cash sales, which was previously prohibited.  The agreement is still contingent upon approval by a federal judge, and it is unclear exactly who and how much would receive any settlement payments.

Fortunately any merchant that is with us and priced on a “pass-though” basis, which is our pricing model, will benefit from any industry reduction. This settlement proposes a 10 basis point reduction.  Unfortunately merchants with other merchant services providers are most likely on a “tiered” model, where those providers would probably not reduce their rates and just pocket the difference themselves.  As for the second part of the settlement which allows passing processing fees on to consumers, many merchants probably would NOT opt to do this as it could just alienate customers.

So while the purpose of this settlement reflects the intent to break the monopoly and price fixing policies of the large banks (who are the members and rule makers of the Visa and Mastercard Card Association), the net results are in general no further benefit to consumers and very little relief from existing costs to merchants.  This is much like the Durbin amendment that reduced debit fees last year. In our opinion though, the acknowledgement of unfair and unethical business practices it is a step in the right direction.