Merchants should support a swipe-fee settlement with Visa and Mastercard because it gives them more flexibility to impose surcharges, according to plaintiffs in a 21-year-old lawsuit targeting Visa and Mastercard fees.
A proposed settlement with the two largest card networks over interchange fees and card-acceptance rules presents an opportunity to educate consumers about the costs of various cards and steer payment choices to less-expensive cards, the plaintiffs’ class counsel wrote in a court filing last week.
The parties in the swipe-fee litigation, which dates to 2005, filed their replies last week to counter objections from merchants who want a federal judge in New York to reject the pact reached in November.
Merchants are becoming more comfortable about collecting surcharges as consumer anger and point-of-sale friction are “no longer the concern that it once may have been,” lawyers for the class plaintiffs wrote Jan. 14 in their 151-page reply to the merchants that objected to the settlement.
The plaintiffs echoed the card networks’ request for U.S. District Judge Brian Cogan to grant preliminary approval of the settlement.
More than a third (34%) of small businesses assess surcharges for credit card payments, according to a 2024 J.D. Power survey of 3,841 small businesses cited in the merchants’ filing.
In a rebuttal declaration filed with the plaintiffs’ reply, economists Joseph Stiglitz and Keith Leffler wrote that the term “surcharge” implies an extra charge, but they argued that isn’t an accurate description.
“Charging for the use of premium cards is a charge for extra services, no different than charging more for a prime steak than for a choice steak,” Stiglitz and Leffler wrote. “Merchants imposing charges in Australia and elsewhere do not refer to them as surcharges, but rather clearly state that (they) are passing along (a part of) the costs imposed by the credit card networks.”
The economists also said they “expect customers to continue to evolve their understanding of the economic rationale and justification for charging for customer choices that impose higher cost on merchants.”
The settlement creates a $21 million fund for a “merchant education program” for technical “and other steering support for merchants in states that restrict merchants’ ability to surcharge by law.” The program also aims to advise merchants on “permissible ways to differentiate” Visa and Mastercard-branded cards based on the issuing bank.
“Their whole approach to that is wrong from the start, which is why the settlement is not helpful and why many, many merchants opposed it,” said Doug Kantor, general counsel of the National Association of Convenience Stores.
Surcharges cause customers to “get upset about it and assume it’s the merchant doing something,” Kantor said Friday in a telephone call. Kantor is also an executive with the Merchants Payments Coalition, which has joined other merchant groups in battling the networks, including over the Credit Card Competition Act.
The current system requires more fundamental changes to obviate a need for surcharges and discounts, which “makes merchants the toll collectors for anticompetitive conduct by the credit card industry,” he said. “You should have the card companies out there saying, ‘Hey, we’re the ones ripping you off.’ They should be clear about it.”
Asked about the role of surcharges, a Visa spokesperson Friday referred to the company’s prior 2025 statement that its settlement with merchants “would provide meaningful relief, more flexibility and options to control how they accept payments from their customers.”
A spokesman for Mastercard did not respond to a message seeking comment.
