Judge rejects $30B Visa, Mastercard 'swipe fee' settlement

Retail industry groups slammed the proposed settlement in March over concerns that the deal provided only temporary relief to a systemic problem.

(The Hill) - A federal judge Tuesday rejected a $30 billion antitrust settlement between Visa, Mastercard and a select group of retailers that was decried by the larger industry.

Visa and Mastercard, which control a combined 80 percent of the credit card network market, agreed in March to limit interchange fees they charge retailers who accept their card. 

As part of the preliminary agreement, which was subject to approval by the judge, the credit card giants agreed to roll back so-called swipe fees by at least 4 basis points for at least three years and cap their fees at 2023 levels for the next five years.

The full order appears to be sealed, but according to the docket entry, “the Court finds that it is not likely to grant final approval to the Settlement and accordingly denies Plaintiffs' motion for preliminary settlement approval.”

“As we noted earlier this month, we are disappointed by this development. We believe the settlement presented a fair resolution of this long-standing dispute, most notably by giving business owners more flexibility in how they manage their card acceptance activities,” Seth Eisen, senior vice president of communications at Mastercard, told The Hill.

Eisen also said Mastercard would pursue other options to resolve the long-standing legal matter.

Visa did not immediately respond to The Hill’s request for comment.

Retail industry groups slammed the proposed settlement in March over concerns that the deal provided only temporary relief to a systemic problem.

“Thankfully, the judge made the right call in recognizing what a bad deal this would have been for Main Street merchants and their customers. It’s extremely unusual for a judge to reject a settlement at the preliminary stage, so this shows how far Visa and Mastercard’s proposal missed the mark,” said Christopher Jones, chief government relations officer and counsel at the National Grocers Association and a member of the executive committee of the Merchants Payments Coalition (MPC).

Retailers pay an average 2.24 percent fee each time they swipe a credit card, although those fees can be as high as 4 percent, according to the National Retail Federation, an MPC member that says swipe fees are typically the biggest operating cost for retailers after labor.

“The credit card payment market has been broken for decades. Leading retailers are grateful that Judge Brodie saw through the façade of the proposed settlement and understood that it would not provide the meaningful change that is needed to correct the competitive imbalance in the interchange ecosystem,” said the Retail Industry Leaders Association.

Retailers also called on Congress to pass the Credit Card Competition Act, a contentions bill sponsored by Sens. Dick Durbin (D-Ill.) and Roger Marshall (R-Kan.) that the credit card industry has aggressively opposed.

The bill would require financial institutions with more than $100 billion in assets to offer at least two network options — and at least one that is not Visa or Mastercard — to process credit card transactions.

Critics say the bill would enrich big box stores, compromise card security and do away with popular rewards programs. Supporters say the bill would bring much-needed competition to break up the Visa-Mastercard duopoly.

“At this point, the only way to bring true relief and fix the broken payments market is for Congress to pass the Credit Card Competition Act,” Jones said.

A Visa spokesperson pointed The Hill to the company's June 13 comment: "We continue to believe that the proposed settlement agreement was the appropriate resolution resulting from lengthy and thoughtful discussions with the merchant class."

Updated at 2:02 p.m. ET.