US Judge Rejects Visa and Mastercard $30 Billion Swipe Fee Settlement 

Visa and Mastercard based in the US, the two largest credit card networks in the world, proposed their multi-billion antitrust settlement with the US merchants in March

A federal judge in the US rejected a $30 billion antitrust settlement between Visa and Mastercard against the leading retailers. Visa and Mastercard in the preliminary swipe fee settlement agreed to limit their fees charged on the merchants. 

Visa and Mastercard based in the US, the two largest credit card networks in the world, proposed their multi-billion antitrust settlement with the US merchants in March. The settlement offered lower swipe rates or also known as interchange fees that are paid by the retailer when any customer uses the card to make purchases. 

Margo Brodie, the US District Judge in Brooklyn said she was not in the favor of Visa and Mastercard and was not likely to grant the final approval to the settlement. She therefore denied the request that was made by the group of preliminary small businesses and merchants for approval. The judgement will help the card companies to make adjustments to resolve their long standing dispute with merchants. 

This settlement is said to be one of the largest in the antitrust history of the US and aims at resolving most litigation claims nationwide dating way back in 2005. The decision made by the US Judge of rejecting the proposed deal has pushed Visa and Mastercard to negotiate a settlement that proves to be more favorable to the merchants. If not agreed by both sides this suit will be sent for trial. As a result, Visa and Mastercard were not happy with the outcome. After the proposed redaction from Visa, Mastercard and the merchants, the federal court judge will issue a written opinion explaining her reasoning.

The Visa and Mastercard deal which was announced in March and subjected to court approval was opposed by many retailers and traders. It aimed to resolve the litigation that began back in 2005 over swipe fees. They objected that the fees would remain too high, Visa and Mastercard would still take control over ways the card transactions were handled. Totaling to a $72 billion, each of those fees typically ranged between 1.5% to 3.5% of each transaction. 

Ideally the retailers are charged 2% of the total transactions made by the customers in each swipe fees. Although this can go up to 4% for some of the premium card holders as per the industry estimates. The settlement called for the average swipe fee to fall at least 0.04% points for three years, and stay at least 0.07% points below the current average for five years.

Visa and Mastercard, the two card companies denied any wrongdoings and agreed to continue for a period of five years with the fixed swipe fee rates that were in existence as of December 31, 2023.  The card companies further decided to remove anti-competitive restrictions in order or the merchants could suggest preferred card options to customers going forward.

The proposed settlement allowed businesses to charge customers extra based on the type of Visa or Mastercard card they used. These surcharges would most likely affect cardholders who receive perks like cash back and airline miles, which can have higher swipe fees.

Most merchants opposed the rules that forbid them from informing their customers of the detailed costing and the reason behind the cost of some cards being high. They were restricted from steering their customers to cheaper card options. Critics mentioned that the  reason for high prices for their consumers were the fees charged which are now charged less when purchases are made by cash. The settlement would give the merchants a temporary and small relief as per trade groups. This would further make it difficult to mount future legal challenges. 

The earlier class action between Visa, Mastercard and 12 million merchants on swipe fee settlement of $5.6 billion is not affected by the judge’s decision on this one. In Manhattan, the federal court made an appeal to upheld the accord seven years after throwing out a $7.25 billion settlement that helped some retailers in March 2023.