In a significant move, a U.S. judge has thrown out a massive $30 billion antitrust settlement involving Visa and Mastercard, which sought to cap the fees charged to merchants for accepting their cards.
On Tuesday, U.S. District Judge Margo Brodie in Brooklyn declined to give preliminary approval to the deal, signaling her unlikelihood to endorse it in the future. This decision came as a blow to a consortium of merchants, mostly small businesses, who had pushed for the settlement.
The agreement, initially announced on March 26, aimed to settle long-standing litigation over interchange fees—often termed swipe fees—that merchants must pay to accept Visa and Mastercard. These fees typically range between 1.5% to 3.5% per transaction, amassing to about $72 billion in 2023 alone, according to the Nilson Report.
Despite the proposed settlement’s promises, numerous merchants and industry groups, including the National Retail Federation, criticized the terms, arguing that the reduction in fees was insufficient and that Visa and Mastercard retained too much control over transactions.
The plan included a modest reduction in average swipe fees by at least 0.04 percentage points for three years and at least 0.07 percentage points below the current average for five years. Additionally, Visa and Mastercard agreed to cap rates for five years and remove provisions preventing merchants from steering customers to cheaper payment options. However, these measures were deemed too little, offering only temporary relief and failing to address the core issue of high transaction fees.
Doug Kantor, general counsel of the National Association of Convenience Stores, highlighted the systemic problem, saying, “It didn’t address the problem of Visa, Mastercard, and banks forming a cartel to issue credit cards and set fees, such that merchants have to accept all cards or none.”
With Judge Brodie’s decision, the possibility looms that Visa and Mastercard may have to renegotiate terms more favorable to merchants or prepare for a trial. Meanwhile, legislation like the Credit Card Competition Act is being championed by some U.S. senators to allow merchants the option to use alternative payment networks for processing Visa and Mastercard transactions.
The judge’s rejection does not impact an earlier $5.6 billion class-action settlement reached among Visa, Mastercard, and approximately 12 million merchants. That agreement was upheld by a federal appeals court in Manhattan in March 2023, following a previous rejection of a $7.25 billion settlement.
Judge Brodie will provide a detailed written opinion after considering proposed redactions from both merchants and card networks, due by June 28.
Visa and Mastercard have expressed disappointment with the ruling, while legal representatives for the merchants seeking the settlement have yet to comment.
