A U.S. court 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 in Brooklyn concluded that she was unlikely to give final approval to the settlement and denied the plaintiffs’ request for preliminary approval.
Her decision could force Visa and MasterCard to negotiate a settlement more favorable to retailers or go to court.
The settlement announced in March was intended to resolve much of the litigation that began in 2005 over so-called swipe fees, also known as interchange fees, that card networks charge merchants to accept Visa and Mastercard cards.
According to the Nilsson Report, these fees will total about $72 billion in 2023.
Those fees generate profits for banks and other card issuers, who funnel much of the money into rewards programs that encourage consumers to spend more.
Many merchants and retail associations considered the fees, which typically range from 1.5% to 3.5%, to be too high.
They also opposed rules that would have prohibited retailers from explaining to customers why some cards are more expensive than others and steered them toward cheaper cards.
Critics also say the fees translate into higher prices for consumers, since sometimes consumers would pay less by using cash.
The proposed settlement called for reducing the average swipe fee by at least 0.04 percentage point over the next three years and keeping it at least 0.07 percentage point below the current average over the next five years.
Visa and Mastercard also agreed to remove fee caps and anti-steering clauses for five years, while giving retailers greater discretion over discounts and charging surcharges.
Several trade groups, including the National Retail Federation, opposed the settlement.
They said the relief for merchants would be small and temporary, and that Visa and MasterCard would continue to be able to dictate card-swipe fees, making it difficult for merchants to mount legal challenges in the future.
Some senators are pushing a bill called the Credit Card Competition Act that would allow retailers to use other payment networks to process Visa and MasterCard transactions.
The dismissal does not affect a separate class action settlement over swipe fees for $5.6 billion between Visa, Mastercard and about 12 million merchants.
A federal appeals court in Manhattan is expected to uphold the deal in March 2023, seven years after the deal was signed. After abandoning $7.25 billion settlement That hurt some retailers.
The case is In re Payment Card Interchange Fees and Merchant Discounts Antitrust Litigation, in U.S. District Court, Eastern District of New York, No. 05-md-01720.
