A federal judge on Tuesday rejected a $30 billion antitrust settlement between Visa, MasterCard and some retailers that had been condemned across the industry.
Visa and MasterCard, which together control 80% of the credit-card network market, agreed in March to limit the interchange fees they charge retailers that accept their cards.
As part of the tentative agreement, which awaits approval from a judge, the credit card giants agreed to reduce so-called “swipe fees” by 4 basis points for at least three years and to cap fees at 2023 levels for the next five years.
The complete command seems to be sealed, Docket Entries“The Court finds that it is unlikely that it will grant final approval to the Proposed Settlement and therefore is denying Plaintiffs’ motion for preliminary approval of the Proposed Settlement.”
“As we said earlier this month, we are disappointed by this development and believe the settlement provides a fair resolution to this long-standing dispute by giving business owners more flexibility in how they manage their card-acceptance operations,” Seth Eisen, senior vice president of communications at Mastercard, told The Hill.
Eisen also said Mastercard would pursue other options to resolve its long-standing legal issues.
Visa did not immediately respond to The Hill’s request for comment.
Retail trade groups slammed the settlement in March, citing concerns that the deal was only a temporary relief for systemic problems.
“Thankfully, the judge recognized how bad a deal this would be for Main Street merchants and their customers and made the right decision. It is highly unusual for a judge to reject a settlement at the preliminary stage and it shows how far off the mark Visa and MasterCard’s proposal was,” said Christopher Jones, chief government relations officer and counsel for the National Grocery Association and executive committee member of the Merchant Payments Coalition (MPC).
According to the National Retail Federation (NRF), an MPC member, retailers pay an average of 2.24 percent in fees every time a credit card is swiped, but those fees can be as high as 4 percent. Swipe fees are typically a retailer’s largest operating cost after labor costs, according to the NRF.
“The credit card payments market has been dysfunctional for decades, and major retailers are grateful that Judge Brody saw through the sham of the proposed settlement and realized it will not deliver the meaningful changes needed to correct competitive imbalances in the interchange ecosystem,” the Retail Industry Leaders Association (RILA) said.
Retailers also called on Congress to pass the Credit Card Competition Act, a controversial bill introduced by Senators Dick Durbin (D-Ill.) and Roger Marshall (R-Kansas) that is strongly opposed by the credit card industry.
The bill would require financial institutions with more than $100 billion in assets to offer at least two network options (at least one other than Visa or Mastercard) for processing credit card transactions.
Critics say the bill would boost profits for big box stores, make cards less secure and eliminate popular rewards programs, while supporters say it would bring much-needed competition to break up the Visa-MasterCard duopoly.
“The only way right now to bring real relief and fix our dysfunctional payments market is for Congress to pass the Credit Card Competition Act,” Jones said.
