A US$30 billion settlement between Visa, Mastercard and retailers to cap credit-card swipe fees is likely to be rejected by a federal judge in Brooklyn, a setback in the two decade-long litigation.
Judge Margo Brodie of the US District Court of the Eastern District of New York indicated in a hearing on Thursday that she won’t sign off on the deal, according to court records. Brodie hasn’t officially ruled, and the decision, which is expected in the coming days, could still change.
Retailers have long fought against the expenses they’re charged for processing card payments, also known as interchange fees. Much of those fees are passed on to the banks that issue the cards, including giants like JPMorgan Chase and Citigroup.
The deal, which was announced in March and was subject to court approval, would have allowed merchants to charge consumers extra in transactions involving Visa or Mastercard credit cards. When the deal was unveiled, the parties said it would also have allowed the use of pricing tactics to steer consumers to lower-cost cards.
“The court’s comments strongly suggest that she won’t accept the settlement,” said Justin Teresi, a Bloomberg Intelligence analyst. “While Judge Brodie doesn’t seem convinced that larger retailers should be allowed to opt out from the settlement, provisions like changes to digital wallet acceptance rules and some state bans on surcharges likely present real adequacy issues.”
A spokesperson for Mastercard said the company was “disappointed” by the developments.
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“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 spokesperson said. “We will pursue our options to ensure a proper resolution of this matter.”
Visa didn’t immediately respond to a request for comment.
Swipe fees totaled more than US$160 billion last year, according to the Merchants Payments Coalition. The Retail Industry Leaders Association, which represents large merchants like Target and Home Depot, called the settlement a “mere drop in the bucket.”
“It proves that merchants deserve injunctive relief, but whether the settlement terms proposed are sufficient to remedy the harm caused by the current interchange system needs to be carefully reviewed,” the business group said in March. BLOOMBERG
