A federal judge on Tuesday shot down the proposed $30 billion swipe-fee settlement between Visa, Mastercard and retailers.
This settlement would've limited the swipe fees merchants pay to credit card processing networks each time you use your credit card to pay for a product or service.
Judge Margo Brodie of the US District Court of the Eastern District of New York shared that she was “not likely to grant final approval” on the settlement in a June 13 court memo.
Swipe fees totaled $172 billion in 2023, according to the Merchants Payment Coalition. The deal was agreed upon by all parties on March 26 and was pending approval by the New York courts.
Now that the settlement has been denied, Visa and Mastercard will either have to renegotiate with merchants or go to trial.
What is the proposed settlement?
The initial swipe fee deal was designed to give merchants more choice in the type of credit cards they could accept. Premium credit cards -- those with higher annual fees and better rewards -- typically charge higher swipe fees than basic credit cards.
This settlement would have allowed merchants to choose which credit cards they would accept, among other things. Credit card networks like Visa and Mastercard currently don't offer merchants this choice.
In addition, the agreement would have included a five-year cap on the swipe fees Visa and Mastercard charge merchants, which typically cost 1.5% to 3.5% of every transaction.
Why was the settlement shot down?
Judge Brodie found the settlement to be lacking, indicating that the proposed five-year cap and improved merchant flexibility weren't enough to fix the issue.
The Merchants Payment Coalition agreed, issuing a statement following Judge Brodie's June 13 court memo. “This proposed settlement would have done nothing to address the problem of how Visa and Mastercard centrally price fix swipe fees," said Christopher Jones, MPC executive committee member and National Grocers Association senior vice president of government relations and counsel.
The MPC also stated that the settlement would make the problem worse. Under the proposal, Visa and Mastercard would be able to increase network fees whenever they wanted to -- wiping out any relief offered by the five-year cap on swipe fees.
For now, this conflict that's spanned two decades will have to wait a little longer to be concluded.
