Judge Says Mastercard/Visa $30 Billion Settlement Is Unfair

Last week, a federal judge rejected Visa and Mastercard’s $30 billion settlement with merchants.

Now, new court filings provide more detail about U.S. District Judge Margo Brodie’s rejection of the deal in the decades-old litigation between the two payments giants and retailers over credit card “swipe fees.”

As Bloomberg News reported Friday (June 28), court documents show that Brodie says that the two companies seem to be able to pay for a “substantially” bigger settlement. She also argued that the proposed deal would have “disproportionately and inequitably” benefited small, local merchants over larger retailers like Walmart and Target.

Had Brodie approved the agreement, it would have allowed retailers to charge consumers extra in transactions involving Visa or Mastercard credit cards, and let merchants employ pricing tactics that guide consumers to lower-cost cards.

Brodie wrote that while the proposed settlement is $30 billion, “the estimated $6 billion in annual savings to merchants is paltry compared to the $100 billion that merchants paid in interchange fees on Visa and Mastercard transactions in 2023. Both companies could withstand a substantially greater judgment,” she added.

PYMNTS has reached out to spokesperson for Visa. “While we are disappointed with the judge’s decision, we continue to believe that direct resolution with merchants is the best way forward and are evaluating all options as the case proceeds. The U.S. payments ecosystem is the most advanced in the world, and our focus is on maintaining the security, innovation, rewards and access to credit that are critical to American consumers and small businesses that power our economy.”

Mastercard issued a statement on Brodie’s decision last week, expressing its disappointment and saying it was pursuing its options to resolve the matter.

“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,” the company said.

Brodie had indicated earlier in June that she was likely to reject the deal, which came as welcome news to groups like the National Association of Convenience Stores.

“We’re gratified to see that the court recognized how bad this settlement was,” Doug Kantor, general counsel to the association, said at the time.

Visa and Mastercard had reached an agreement with merchants in March, saying the accord — assuming the judge approved it — would end years of litigation around swipe fees and restrictions placed on merchants, while also lowering credit card interchange fees.

The companies also say the deal would cap those fees for five years, while providing merchants with more choice in how they accept digital payments.

“It provides comprehensive market-based solutions to too-high swipe fees, while providing immediate fee relief to merchants as they make these new competitive tools work for them,” one of the merchants’ lawyers, Steve Shadowen of Hilliard Shadowen said in March.

In April, the National Retail Federation (NRF) asked the court to reject the proposed settlement, saying the deal was reached without the guidance of major retailers or trade associations and that it failed to address “anti-competitive practices.”

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