$30 Billion Swipe Fee Settlement in Jeopardy After Judge’s Ruling

The proposed $30 billion settlement of the Visa/Mastercard swipe fee litigation, which has been going on for nearly two decades, may still need some more time to be resolved. U.S. District Judge Margo Brodie indicated in a filing this week that she would likely not approve the settlement, according to the Wall Street Journal. Brodie had made remarks during a June 13 hearing citing concerns by the National Retail Federation (NRF) and other merchant groups that the settlement is insufficient and doesn’t do enough to remedy harm or create meaningful changes.

Attorneys for the NRF wrote in a letter to Brodie in April that the proposed settlement would have failed to end Visa and Mastercard’s practice of centrally setting swipe fees charged by all banks that issue their cards. It also failed to reverse an “honor all cards” rule requiring merchants to accept all cards from each network, regardless of fees.

The settlement would have reduced swipe fee rates by four basis points for three years and average rates by seven basis points for five years, but these fees currently average 2.26%, or 226 basis points. Merchants would have saved an average of $6 billion annually, but Visa and Mastercard’s fees totaled $100 billion last year, according to the NRF.

The NRF also called parts of the settlement impracticable or meaningless, such as the provision that would allow merchants to impose a surcharge on consumers using premium cards with higher-than-average swipe fees. Additionally, the settlement didn’t include an opt-out provision for retailers that did not agree with its terms.

“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,” said Stephanie Martz, Chief Administrative Officer and General Counsel at the NRF in a statement. “The proposed reduction in swipe fees was tiny and temporary and ignored the underlying issue of how these fees are centrally set rather than allowing banks to compete to offer the best rates. We’re glad the judge has seen this backroom deal for what it is so we can move forward to real relief from these ever-increasing fees that drive up costs for small businesses and prices for American families.”