By Jonathan Stempel
NEW YORK (Reuters) -Visa and Mastercard reached an estimated $30 billion settlement to limit credit and debit card fees for merchants, with some savings likely to be passed on to consumers through lower prices.
The antitrust settlement is one of the largest in U.S. history, and upon court approval would resolve claims in litigation that began in 2005.
Merchants have long accused Visa and Mastercard of charging inflated swipe fees, or interchange fees, when shoppers used credit or debit cards, and barring them through “anti-steering” rules from directing customers toward cheaper means of payment.
Under the settlement announced on Tuesday, Visa and Mastercard will reduce interchange rates by four basis points (0.04 percentage points) in the United States for three years, and cap rates for five years.
Both card networks also agreed to remove anti-steering provisions. They denied wrongdoing in agreeing to settle.
The fee rollbacks and caps alone are worth $29.79 billion, according to court papers, and Visa estimated that small businesses comprise more than 90% of the settling merchants.
Joseph Stiglitz, a Nobel Prize-winning economist hired by the merchants as an expert, in an affidavit said the settlement “greatly enhances merchants’ freedom to steer customers using the linchpin of competition–prices,” and could lead to “very substantial” savings for merchants.
“Competition among merchants results in these cost savings being passed on to customers in the form of lower prices,” Stiglitz added.
Last March, the federal appeals court in Manhattan upheld a related $5.6 billion class-action settlement by Visa and Mastercard and covered about 12 million merchants.
That settlement did not resolve what kinds of fees Visa and Mastercard could impose, and not all retailers were covered by it.
(Reporting by Jonathan Stempel in New York; Editing by Chizu Nomiyama, Alexandra Hudson)
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