*

Fees would decline over five years, consumers may benefit

*

Critics say settlement offers merchants little relief

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Court approval required, likely not before late 2024

(Adds comments from trade groups, Visa and Mastercard ( MA ); adds

details on settlement and fees, stock prices, case citation)

By Jonathan Stempel

NEW YORK, March 26 (Reuters) - Visa and Mastercard ( MA )

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 announced on Tuesday is one of the

largest in U.S. history, and if it received court approval would

resolve most claims in nationwide litigation that began in 2005.

Some opponents believe it may not go far enough.

Merchants have long accused Visa and Mastercard ( MA ) 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.

Swipe fees typically include small fixed fees plus

percentage of total sale amounts, and average about 1.5% to 3.5%

per transaction according to Bankrate.com.

Under the settlement, Visa and Mastercard ( MA ) would reduce

swipe rates by at least four basis points (0.04 percentage

points) for three years, and ensure an average rate that is

seven basis points below the current average for five years.

Both card networks also agreed to cap rates for five

years and remove anti-steering provisions.

Merchants will have more discretion to offer discounts, or

impose surcharges on cards with higher interchange fees.

Many already warn customers at checkout they will pay more

using cards instead of cash.

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.

Visa and Mastercard ( MA ) denied wrongdoing in agreeing to settle.

In separate statements, Visa's North American president

Kim Lawrence said the accord addressed "true pain points"

identified by small businesses, while Mastercard ( MA ) General Counsel

Rob Baird said it offered "substantial certainty" to businesses.

Visa and Mastercard ( MA ) shares were each up less than 1% in

afternoon trading, with Baird analyst David Koning writing that

the settlement removes an "overhang of uncertainty."

The settlement requires approval by U.S. District Judge

Margo Brodie in Brooklyn, New York, likely not before late 2024

or early 2025, and appeals are possible.

OPPOSITION EXPECTED

"It's a bad deal for merchants," said Doug Kantor,

general counsel of the National Association of Convenience

Stores, in an interview. "It provides very small, very temporary

relief, but afterward Mastercard ( MA ) and Visa will be free to raise

rates, and the agreement doesn't provide a mechanism to slow an

increase."

The Retail Industry Leaders Association, which

represents businesses that employ more than 42 million

Americans, said the settlement required closer review but

amounted to "a mere drop in the bucket."

TD Cowen analyst Jaret Seiberg wrote that small banks

and credit unions may object because big retailers such as

Walmart ( WMT ) could cut deals with larger banks for cards that

offer discounts at checkout.

But he said the accord reflects "extraordinary

concessions" by Visa, Mastercard ( MA ) and banks because merchants can

impose surcharges on airline and cash-back credit cards, though

few may because they would rather complete sales than save on

fees.

Last March, the federal appeals court in Manhattan

upheld a $5.6 billion class-action settlement by Visa and

Mastercard ( MA ), covering damages for about 12 million merchants, but

did not resolve what kinds of fees could be imposed.

Tuesday's settlement attempts to do that, but would not

resolve damages claims by merchants that opted out of $5.6

billion settlement and sued separately.

Joseph Stiglitz, a Nobel Prize-winning economist and expert

hired by the settling merchants, 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.

Some U.S. senators have promoted legislation, the Credit

Card Competition Act, to let merchants process Visa and

Mastercard ( MA ) credit cards through other payment networks.

Darrin Peller, an analyst at Wolfe Research, wrote that

Tuesday's settlement "likely takes some wind out of the sails"

of that effort.

The court case is In re Payment Card Interchange Fee and

Merchant Discount Antitrust Litigation, U.S. District Court,

Eastern District of New York, No 05-md-01720.