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Card Fees

There’s a change in plans for the $30 billion antitrust settlement between Visa and Mastercard, as a federal judge has rejected the proposed settlement.

U.S. District Judge Margo Brodie officially rejected the preliminary settlement on June 25th. Less than a week after the rejection, Brodie released her 88-page opinion, which in summary stated her reason for her decision was due to Visa and Mastercard’s failure to treat all merchants equitably and their lack of adequate relief compared to what merchants could potentially win at trial.

The judge described the estimated $6 billion in annual savings for merchants as ‘paltry’ compared to the $100 billion in fees they paid to Visa and Mastercard in 2023.”

She also emphasized the difficulty merchants would face, as many states have laws that may make it nearly impossible to take advantage of the proposed surcharging provisions while complying with state laws.

Writing, “large national merchants are more likely to accept American Express and operate in states that prohibit surcharging, and therefore, these merchants ‘gain no appreciable benefit from the [Settlement],’ while merchants ‘that do not take American Express and operate in states that permit surcharging . . . derive a potentially substantial benefit.”

Judge Brodie also felt Visa and Mastercard’s provisions regarding their “Honor All Cards” rule, which requires merchants that accept one of the network cards to accept all of of their cards, was an issue because the true relief merchants are looking for is the elimination of these rules.

Visa and Mastercard Reach Settlement in March

On March 25, 2024 Visa and Mastercard announced that they reached an interchange settlement with merchants, after nearly two decades of litigation. As you know, the lawsuit alleged that Visa and Mastercard violated antitrust laws, leading merchants to pay excessive interchange fees simply for accepting Visa and Mastercard.

According to the Nilson Report, debit and credit card swipe fees cost merchants and their customers over $172 billion in 2023, more than double over a decade ago.

Within this settlement, Merchants were expecting interchange rate reductions by at least 7 basis points, the ability to offer discounts to customers who don’t pay with Visa/Mastercard credit cards, modified surcharge rules, removing all Merchant Buying Group restrictions, and more.

While many merchants were looking forward to these changes, the proposed settlement did receive opposition and criticism from retail industry groups. The Retail Industry Leader Association called it “a mere drop in the bucket” and Doug Kantor, general counsel at the National Association of Convenience Stores, argued the settlement “tries to cut off every other merchant with a lawsuit from being able to ask for more.”

Visa and Mastercard will need to propose more favorable solutions for merchants or face the risk of going to trial. In the wake of the ruling, both networks expressed disappointment.

“We continue to believe that the proposed settlement agreement was the appropriate resolution resulting from lengthy and thoughtful discussions with the merchant class,” Visa said in a statement.

“We will pursue our options to ensure a proper resolution of this matter,” Mastercard added.

Our Thoughts

We asked a few of our interchange experts their insights and thoughts on the recent news:

“When the big merchant lobby started objecting to the settlement soon after it was announced, the chances it would be rejected became higher and looks like that is what is going to happen.

If the proposal is rejected, the two options now are a new settlement with even greater benefits to the merchant, or a trial. I don’t think Visa and Mastercard want to see a trial, so it’s more than likely that another settlement further in merchants’ favor, but that’s my guess. Unfortunately, it’s back to the waiting game!” Taige Caldwell, Sr. Payments Consultant

“I agree with Taige’s sentiment, I will also add that this objection has just delayed everything. While there was never an announced date, some were hoping for relief in 2025, but that likely could be further delayed by this now.” Joey Dembek, Head of Solution Delivery

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Breaking News: Judge Believes Visa and Mastercard Can Manage a Larger Settlement