Judge Likely to Reject Proposed Swipe Fee Settlement

Merchants welcome the judge’s comments on the proposed Visa and Mastercard settlement.

In a hearing this week on preliminary approval of a proposed settlement in the long-running class action swipe fee litigation announced in March, U.S. District Judge Margo Brodie indicated that she is unlikely to approve the settlement.

Brodie said it does not appear to provide sufficient relief and cited a number of specific concerns. She indicated that an opinion could come in about a week.

Multiple merchant trade associations voiced opposition to the settlement ahead of the hearing, saying it would not provide sufficient relief to merchants or their customers.

The Merchants Payments Coalition released a statement saying it welcomed the comments made by the judge regarding the proposed settlement.

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

“The judge made a strong statement in support of justice for merchants and consumers,” MPC Executive Committee member and National Grocers Association Senior Vice President of Government Relations and Counsel Christopher Jones said. “We appreciate that there was recognition of the fatal flaws that would have made the settlement a bad deal for Main Street rather than a correction of credit card industry violations of the antitrust laws. It’s past time for Congress to pass the Credit Card Competition Act to fix this broken market.”

NACS has been aggressively pushing back on Visa and Mastercard’s claims that the settlement will help retailers—it may in fact prevent actual change from happening in the marketplace. It would lock-in the Visa/Mastercard system of setting banks’ swipe fees and prevent other lawsuits (like NACS’) from seeking real reforms.

Under the proposed agreement, Visa and Mastercard would lower credit card swipe fees—which averaged 2.26% of the transaction amount in 2023—by at least four basis points for at least three years. But the settlement specifically allows Visa and Mastercard to increase the network fees they charge as much as they want at any time, wiping out any reduction in swipe fees.

While the case has been in court for nearly 20 years, the four basis-point reduction is illusory and would not come close to addressing the fact that the average rate has grown two dozen basis points, from 2.02%, since 2010, according to data from Nilson.

The settlement similarly does not address the lack of competition in the marketplace and is not related to the Credit Card Competition Act. Bipartisan bills introduced in both the U.S. House and Senate would require the largest U.S. banks that issue Visa or Mastercard credit cards to allow transactions to be processed over at least two unaffiliated card payment networks—the same process that has been used for debit card transactions for more than a decade.

“This proposed settlement would have done nothing to address the problem of how Visa and Mastercard centrally price fix swipe fees,” Jones said. “Instead, the settlement would have locked in cartel pricing. It was a sham that would have made the situation worse.”

Visa and Mastercard credit card swipe fees alone totaled $100.77 billion in 2023, rising from $93.2 billion the year before and topping the $100 billion mark for the first time.

PPA members are encouraged to reach out to their members of Congress and ask that they support the Credit Card Competition Act. NACS makes it easy for retailers and suppliers to send a message to their legislators via the NACS Grassroots Portal.

Note: this article was originally published by NACS