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A federal judge on Tuesday rejected a $30 billion settlement reached between credit card giants Visa and Mastercard and U.S. merchants, as a nearly two-decade battle over so-called swipe fees continues.
While the details of the ruling in U.S. district court in New York were not made public, a memorandum released by the court said that Judge Margo Brodie was “not likely to grant final approval” to the preliminary settlement absent any changes.
The court has given lawyers until noon on Friday to submit redactions, according to the docket. Brodie’s rejection of the settlement was largely expected after she said in a hearing earlier this month that she wasn’t likely to give it the go-ahead.
The settlement, which was one of the largest in U.S. antitrust history, resolved a 2005 lawsuit alleging that merchants were forced to pay “excessive fees” to accept Visa and Mastercard credit cards, and that the two card issuers and member banks violated antitrust laws. Together, Visa and Mastercard make up about 80% of the credit card market.
Under the original agreement, the credit card giants were required to reduce swipe fees for U.S. merchants by four basis points and guarantee that fees will not be raised from a set level for at least five years. The terms of the agreement also gave Visa and Mastercard control over credit card network fees, the cost of processing transactions.
Businesses have long wrestled with credit card issuers over swipe fees, which are payments that credit card companies and card-issuing banks receive for enabling a transaction. In 2023, American merchants were charged a total of nearly $101 billion in fees for Visa and Mastercard credit cards, a $7.5 billion increase from 2022, according to the latest Nilson Report. These fees are burdensome for businesses, and are often passed along to consumers.
Industry trade and lobbying groups welcomed Tuesday’s decision. The National Retail Federation (NRF) called the agreement “flawed” and said the proposed reductions to fees were“tiny and temporary.”
“This settlement was never agreed to by the retail industry as a whole and would have done nothing to end anticompetitive practices and fix our nation’s broken payments market,” NRF chief administrative officer and general counsel Stephanie Martz said in a statement Tuesday.
Chief government relations officer and general counsel of the Merchants Payments Coalition, Christopher Jones, said in a statement “the judge made the right call in recognizing what a bad deal this would have been for Main Street merchants and their customers.”
Visa said in March that more than 90% of merchants that agreed to the settlement were small businesses.