By Jonathan Stempel
NEW YORK (Reuters) – A U.S. judge on Tuesday threw out a $30 billion antitrust settlement in which Visa and Mastercard agreed to limit the fees they charge merchants that accept their credit and debit cards.
U.S. District Judge Margo Brodie in Brooklyn concluded that she was unlikely to give final approval to the settlement and therefore denied the plaintiffs’ request for preliminary approval.
Its decision could force Visa and Mastercard to negotiate a settlement more favorable to merchants, or to go to court.
The settlement announced in March aimed to resolve most of the disputes that began in 2005 over so-called swipe fees, also known as interchange fees, that merchants pay to accept Visa and Mastercard and that card networks set.
These fees totaled about $72 billion in 2023, according to the Nilson report. They generate profits for banks and other card issuers, who channel much of the fees into rewards programs that encourage consumers to spend more.
Many merchants and retail groups considered the fees, typically 1.5% to 3.5%, excessive.
They also opposed rules prohibiting merchants from explaining to their customers why certain cards cost more than others and steering them toward cheaper cards.
Critics also say these fees lead to higher prices for consumers, who now sometimes pay less to use cash.
The agreement calls for average sweep fees to decrease by at least 0.04 percentage points for three years and remain at least 0.07 percentage points below the current average for five years.
Visa and Mastercard also agreed to cap rates for five years and remove anti-guiding provisions, while merchants have more leeway to offer discounts or impose surcharges.
Several trade groups, including the National Retail Federation, opposed the regulation.
They said the relief for merchants was small and temporary, and made it difficult for them to mount future legal challenges, while letting Visa and Mastercard dictate swipe fees.
Some U.S. senators have promoted legislation, the Credit Card Competition Act, that would allow merchants to use other payment networks to process Visa and Mastercard transactions.
The dismissal does not affect the separate $5.6 billion class-action fee settlement between Visa, Mastercard and about 12 million merchants.
A federal appeals court in Manhattan upheld that deal in March 2023, seven years after rejecting a $7.25 billion settlement that harmed some retailers.
Case in Antitrust Litigation Concerning Payment Card Interchange Fees and Merchant Rebates, United States District Court, Eastern District of New York, No. 05-md-01720.
(Reporting by Jonathan Stempel in New York)
