A US judge on Tuesday rejected a $30 billion antitrust settlement in which Visa and Mastercard agreed to limit fees they charge merchants who accept their credit and debit cards.
US District Judge Margo Brodie in Brooklynsaid she wasnot likely to grant final approval to the settlement,and thereforedeniedthe requestby a group of merchants, primarily small businesses, forpreliminary approval.
Many merchants and retail trade groups opposed the accord, saying fees would remain too high and that Visa and Mastercard would retain too much control over how card transactions are handled.
Thedecision could force Visa and Mastercard to negotiate a settlement more favorable to merchants, or go to trial.Brodie will issue a written opinion explaining her reasoning after letting merchants, Visa and Mastercard propose redactions.
Visa did not immediately respond to requests for comment. Mastercard said it was disappointed, believing the settlement was fair and would help businesses manage card transactions.
The settlement announced in March was intended to resolve most litigation that began in 2005 over so-called swipe fees, also known as interchange fees, that merchants pay to accept Visa and Mastercard, and which the card networks set.
Those fees,typically 1.5% to 3.5%,totaled about $72 billion in 2023 according to the Nilson Report. They generate profits for bank and other card issuers, which funnel many fees into rewards programs that encourage consumers to spend more.
The settlement called for the average swipe fee to fall at least 0.04 percentage points for three years, and stay 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-steering provisions, while merchants got more discretion to offer discounts or impose surcharges.
But many merchants said the lowered fees remained excessive. They also objected to rules forbidding them from telling customers why some cards cost more than others, and steering them toward cheaper cards.
Some critics also said the fees lead to higher prices for consumers, who are now sometimes charged less for using cash.
Trade groups including the National Retail Federation complained that the settlement would have provided only small and temporary relief for merchants, and made it difficult for them to mount future legal challenges.
“It didn’t address the problem of Visa, Mastercard and banks forming a cartel to issue credit cards and set fees, such that merchants have to accept all cards or none,” Doug Kantor, general counsel of the National Association of Convenience Stores, said in an interview.
“The next step, presumably, is a trial,” he added.
Brodie hadsignaledat a June 13 hearing that rejection of the accord was likely.
Some senators have promoted legislation, the Credit Card Competition Act, to let merchants use other payment networks to process Visa and Mastercard transactions.
The judge’s decisiondoes not affect a separate$5.6 billion class action swipe fee settlementamong Visa, Mastercard and about 12 million merchants.
A federal appeals court in Manhattan upheld that accord in March 2023, seven years afterthrowing outa $7.25 billion settlement that short-changed some retailers.
The case is In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, U.S. District Court, Eastern District of New York, No 05-md-01720.