Visa and Mastercard’s $30 Billion Antitrust Settlement Faces Rejection by U.S. Judge

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Visa and Mastercard’s proposed $30 billion antitrust settlement, aimed at curbing credit and debit card fees for merchants, is on the verge of being rejected. U.S. District Judge Margo Brodie in Brooklyn indicated at a Thursday hearing that she is likely to disapprove the accord, according to court records. The settlement, announced in March, sought to resolve most claims in the nationwide litigation involving swipe fees.

The proposed settlement included a modest reduction in swipe fees, averaging 0.04 percentage points for three years. Additionally, Visa and Mastercard agreed to cap rates for five years and remove anti-steering provisions that prevent merchants from encouraging customers to use cheaper payment methods. Small businesses represented over 90% of the settling merchants.

However, the settlement faced significant opposition. The National Retail Federation (NRF) and other critics argued that the benefits were “meager and temporary” and that the settlement still allowed Visa and Mastercard to dictate swipe fees. They also opposed the broad release of future claims, viewing it as overly restrictive on merchants’ rights to challenge fees.

Judge Brodie’s comments at the hearing suggested she will likely not approve the settlement. She plans to issue a detailed opinion explaining her decision and reasoning.

Both Visa and Mastercard expressed disappointment following the judge’s comments. Mastercard described the settlement as a “fair resolution,” while Visa considered it an “appropriate resolution” to the nearly 19-year-old case.

Swipe fees, the charges levied on merchants for processing credit and debit card payments, have long been a contentious issue. These fees totaled $172 billion in 2023 and have more than doubled over the past decade, according to the Merchants Payments Coalition. Merchants argue that these fees are excessive and that the card networks’ practices, such as anti-steering provisions, are anti-competitive.

The case, titled “In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation,” has been ongoing since it was filed in the U.S. District Court, Eastern District of New York (No 05-md-01720).

If the settlement is rejected, Visa and Mastercard may need to negotiate new terms that more adequately address the objections raised by merchants. This decision could have significant implications for merchants and the credit card industry, potentially leading to further reductions in swipe fees and changes in how fees are regulated and applied.

The outcome of this case underscores the ongoing tension between major credit card networks and merchants over transaction fees and highlights the broader implications for the financial industry.