In a recent development, a federal judge in the Eastern District of New York stated that card issuers Visa and Mastercard could likely withstand a larger settlement with merchants regarding swipe fees than the proposed $30 billion deal that was rejected last week. The judge, Margo Brodie, shared this assessment in an 88-page opinion released just three days after she rejected the preliminary settlement.
The proposed settlement aimed to lower and cap swipe fees, also known as interchange fees, paid by over 12 million merchants for Visa and Mastercard transactions. However, Judge Brodie deemed the estimated $6 billion in annual savings for merchants as "paltry" compared to the estimated $100 billion in fees paid to Visa and Mastercard in 2023.
The long-running antitrust litigation surrounding swipe fees began in 2005 and could potentially go to trial if a new settlement that meets the judge's standards isn't reached between the card issuers and merchants. The rejected settlement would have slightly reduced swipe fees for three years, capped fees for five years, and provided merchants with more flexibility to impose surcharges.
Despite the judge's decision, Visa expressed disappointment but reiterated its belief in a direct resolution with merchants. Mastercard, on the other hand, expressed disappointment as well and highlighted the potential benefits of the rejected settlement in promoting competition and offering value to businesses.
Overall, the judge's rejection of the proposed settlement reflects the complexity and ongoing nature of the legal battle between card issuers and merchants over swipe fees. The case continues to evolve, with both sides evaluating their options as they navigate the legal process.