Judge Says $30 Billion Settlement Between Mastercard and Visa Is Unfair

Last week, a federal judge dismissed Visa And Mastercard cards $30 billion settlement with traders.

Now, new court documents provide more details from the U.S. District Judge Margo Brodie rejection of the agreement in the decades-old dispute between the two Payments giants and retailers over credit card “swipe fees.”

As Bloomberg News reported On Friday (June 28), court documents show Brodie said that the two companies appear to be able to pay a “significantly” larger settlement. It also argued that the proposed deal would have “disproportionately and unfairly” benefited small, local merchants compared to large retailers like Walmart and Target.

If Brodie had approved the deal, it would have allowed retailers to charge consumers extra fees for transactions involving Visa or Mastercard credit cards, and would have allowed merchants to use pricing tactics that steer consumers toward lower-cost cards.

Brodie wrote that even though the proposed settlement is worth $30 billion, “the estimated $6 billion in annual savings to merchants pales in comparison to the $100 billion that the merchants paid in interchange fees on Visa and Mastercard transactions in 2023. Both companies could withstand significantly harsher judgment,” she added.

PYMNTS has reached out to a Visa spokesperson. “While we are disappointed in the judge’s decision, we continue to believe that a direct settlement with the merchants is the best path forward and we are evaluating all options as the case progresses.” The U.S. payments ecosystem is the most advanced in the world and we are focused on maintaining the security, innovation, rewards and access to credit that are essential to American consumers and the small businesses that power our economy.

Mastercard released a statement on Brodie’s decision last week, expressing disappointment and saying it was exploring its options to resolve the matter.

“We believe the settlement presented a fair resolution to this long-standing dispute, including giving business owners more flexibility in how they manage “their card acceptance activities,” the company said.

Brodie had indicated earlier in June that she was susceptible to reject the agreementwhich was good news for groups like the National Association of Convenience Stores.

“We’re glad to see the court recognized how bad this deal was,” Doug Kantor, the association’s general counsel, said at the time.

Visa and Mastercard had reached an agreement with merchants in March, saying the deal — assuming the judge approves it — would end years of litigation over swipe fees and merchant restrictions, while reducing credit card interchange fees.

The companies also say the deal would cap those fees for five years. years, while provide traders more choice in how they accept digital payments.

“It provides complete market-based solutions for excessively high scan rates costs, “while providing immediate fee relief to merchants who use these new competitive tools to work for them,” one of the merchants’ lawyers, Steve Shadowen of Hilliard Shadowen, said in March.

In April, the National Retail Federation (NRF) asked the court to reject the proposed regulationclaiming the deal was reached without the advice of major retailers or trade associations and failed to address “anti-competitive practices.”