Judge rejects multi-billion Visa, Mastercard payment in skid-fee case

A federal judge on Tuesday rejected a $30 billion antitrust settlement in which Visa and Mastercard agreed to cap the fees they charge merchants who accept their credit and debit cards.

U.S. District Judge for the Eastern District of New York Margo Brodie in Brooklyn said she was unlikely to give final approval to the settlement and therefore denied a request for preliminary approval made by a group of traders made up mostly of businesses small.

The settlement was opposed by many retailers and trade groups, including the National Retail Federation. Opponents argued that card fees would remain too high under the deal, while Visa and Mastercard would retain too much control over card transactions.

The judge’s ruling could force Visa and Mastercard to negotiate a new deal that’s more favorable to merchants or go to trial and face an uncertain outcome.

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A federal judge rejected a proposed settlement in the recent Visa and Mastercard swipe fee case. (Karol Serewis/SOPA Images/LightRocket via Getty Images/Getty Images)

Merchants and card networks will have June 28 to request edits to a written opinion Brodie will draft explaining her reasoning for the decision.

National Retail Federation CAO and general counsel Stephanie Martz said of the decision that, “This settlement was never agreed to by the retail industry as a whole and would have done nothing to end anticompetitive practices and to fix our country’s broken payments market.”

TICKER Safety The last AmENdmENT Change %
V VISA INC. 273.69 +0.03 +0.01%
me MASTERCARD INC. 452.43 -3.23 -0.71%

Visa issued a statement on June 13 saying it was disappointed by the court’s stance on the proposed settlement when the judge signaled she was likely to reject the settlement and that it believes in continued engagement between the industry and merchants going forward.

Mastercard did not immediately respond to a request for comment.

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Swipe fees are charged per transaction, and card issuers often use the revenue to fund rewards programs. (Robert Nickelsberg/Getty Images/Getty Images)

The settlement, which was announced March 26, was intended to resolve most of the litigation that began in 2005 over the swipe fees that merchants pay to accept Visa and Mastercard and that are imposed by the card networks.

Such fees are typically 1.5% to 3.5% of each transaction and reached an estimated $72 billion in 2023 according to the Nilson Report. These fees generate profits for banks and other card issuers, which pass many of the fees into rewards programs that encourage consumers to spend more.

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Visa and Mastercard may go to trial after judge rejects proposed settlement. (Photo by Matt Cardy/Getty Images / Getty Images)

The deal calls for the average sliding fee to fall to at least 0.04 percentage points for three years and stay at least 0.07 percentage points below the current average for at least five years.

Visa and Mastercard also agreed to cap fees for five years and remove anti-steering provisions that prevent merchants from steering customers to cheaper cards, while merchants would have been given more freedom to offer discounts or set fees addition according to the proposed solution.

Many merchants objected to the rules, which barred them from telling customers why some cards cost more than others, as well as from steering customers to cheaper cards.

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The judge’s decision does not affect an earlier payment of $5.6 billion in a class action between Visa, Mastercard and approximately 12 million merchants.

Reuters contributed to this report.

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