Visa, MasterCard Settle Historic Price Fixing Case - Free Enterprise
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Visa, MasterCard Settle Historic Price Fixing Case

A class-action suit against Visa and MasterCard on credit card swipe fees has reached a settlement and it requires a large payout to merchants.

The credit card giants will be paying about $6 billion to plaintiffs to settle claims that credit cards engaged in price fixing on swipe fees. The settlement also includes an eight-month reduction in swipe fees that represents $1.2 billion in savings for business owners.

According to the settlement, merchants will be able to pass along the cost of credit card swipes to customers which Visa and MasterCard did not allow previously.

The terms were acceptable to the plaintiffs, a class of almost 7 million merchants according to CNN. But not all small businesses are in favor of the negotiated terms.

The National Association of Convenience Stores, which represents some 3,700 convenience and other store owners, is gearing up to challenge the settlement.

They argue that it doesn't go far enough to protect business owners from potentially unfair practices by credit card companies, according to The Wall Street Journal. The possibility that swipe fees could go back to their current rates in eight months leaves small business owners in a difficult position financially.

The purpose of antitrust laws is to keep prices competitive by forcing industry members to actually compete. But it appears that this trade group doesn't believe prices will stay competitive even though Visa and MasterCard have agreed to this settlement.

Once the eight-month mandatory swipe fee decrease ends, Visa and MasterCard will still have to deal with consumer reaction to swipe fees. It's possible that merchants will now choose to pass the swipe fee cost to customers which might discourage credit card transactions. In that case, the card with the lowest fees would have an economic advantage.

Let's hope Visa and MasterCard won't be engaging in any more alleged price fixing. Lower swipe fees are good for consumers and for small business bottom lines.

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