Judge rejects multibillion Visa, Mastercard settlement in swipe fee case

A federal judge on Tuesday rejected a $30 billion antitrust settlement under which Visa and Mastercard agreed to limit fees they charge merchants that 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 grant final approval to the settlement and therefore denied the request for preliminary approval made by a group of merchants made up primarily of small businesses.

Merchants and the card networks will have June 28 to request redactions to a written opinion Brodie will draft that explains her reasoning for the ruling. The National Retail Federation's 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 fix our nation's broken payments market.

The settlement, which was announced on March 26, was intended to resolve most litigation that began in 2005 over swipe fees that merchants pay to accept Visa and Mastercard and are set by the card networks. Such fees are typically 1.5% to 3.5% of each transaction and totaled about $72 billion in 2023 according to the Nilson Report. Those fees generate profits for banks and other card issuers, which funnel many fees into rewards programs that encourage consumers to spend more.

The settlement called for the average swipe 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 rates for five years and remove anti-steering provisions that prevent merchants from steering customers to cheaper cards, while merchants would have received more discretion to offer discounts or impose surcharges under the proposed settlement.

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