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A federal judge on Tuesday rejected a $30 billion antitrust settlement in which Visa and MasterCard agreed to limit the fees they could charge merchants that accept their credit and debit cards.
U.S. District Judge Margo Brody of the Eastern District of New York in Brooklyn said she was unlikely to give final approval to the settlement and denied a request for preliminary approval by a group of shopkeepers, mostly small businesses.
The settlement was opposed by many retailers and industry groups, including the National Retail Federation, who argued that the agreement would leave card fees too high and give Visa and MasterCard excessive control over card transactions.
The judge’s decision could force Visa and Mastercard to negotiate a new deal that’s more favorable for retailers or go to court and face an uncertain outcome.
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A federal judge has rejected a proposed settlement between Visa and MasterCard in the latest card payment fee lawsuit. (Karol Selewis/SOPA Images/LightRocket via Getty Images / Getty Images)
Merchants and card networks have until June 28 to request the removal of the opinion, giving Brody time to prepare an opinion explaining the reasons for his decision.
Stephanie Martz, chief operating officer and general counsel of the National Retail Federation, said of the decision, “This settlement was not agreed upon by the retail industry as a whole and would have done nothing to end anticompetitive practices or fix our nation’s dysfunctional payments market.”
| Ticker | safety | last | change | change % |
|---|---|---|---|---|
| Five | Visa Inc. | 273.69 | +0.03 | +0.01% |
| Massachusetts | MasterCard Japan Co., Ltd. | 452.38 | -3.27 | -0.72% |
Visa issued a statement on June 13, in which the judge indicated he was likely to reject the settlement, saying it was disappointed with the court’s stance on the settlement and that it believes in the continued relationship between the industry and its merchants.
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 their rewards programs. (Robert Nickelsburg/Getty Images/Getty Images)
The settlement, announced March 26, was intended to resolve much of the litigation that began in 2005 over swipe fees set by card networks that merchants pay to accept Visa and Mastercard cards.
These fees, which are typically 1.5% to 3.5% of each transaction, could total about $72 billion by 2023, according to the Nilsson Report. They generate profits for banks and other card issuers, with many of them going to rewards programs that encourage consumers to spend more.
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Now that the judge has rejected the settlement offer, Visa and Mastercard may go to court. (Photo by Matt Cardy/Getty Images/Getty Images)
The proposed settlement called for reducing the average swipe fee by at least 0.04 percentage points over the next three years and keeping it 0.07 percentage points below the current average for at least five years.
Visa and MasterCard also agreed to impose a five-year fee cap and remove anti-steering clauses that prevent retailers from steering customers to cheaper cards, although under the settlement retailers will have more discretion to offer discounts or charge surcharges.
Many retailers opposed rules that would have prohibited them from explaining to customers why some cards are more expensive than others or steering them toward cheaper cards.
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The judge’s decision does not affect an earlier $5.6 billion swipe fee settlement in a class action lawsuit by Visa, MasterCard and about 12 million merchants.
Reuters contributed to this report.
