Judge Rejects Visa-Mastercard $30 Billion Swipe Fee Settlement

WASHINGTON, DC (July 1, 2024) – The Merchants Payments Coalition welcomed an order issued Tuesday, June 25 by a federal judge rejecting a proposed $30 billion class-action settlement over Visa and Mastercard credit card “swipe” fees.

“Visa and Mastercard wanted a settlement that would let them keep price-fixing swipe fees and blocking competition,” said Christopher Jones, MPC Executive Committee member and National Grocers Association Chief Government Relations Officer and Counsel. “Thankfully, the judge made the right call in recognizing what a bad deal this would have been for Main Street merchants and their customers.

“It’s extremely unusual for a judge to reject a settlement at the preliminary stage, so this shows how far Visa and Mastercard’s proposal missed the mark. At this point, the only way to bring true relief and fix the broken payments market is for Congress to pass the Credit Card Competition Act.”

U.S. District Judge Margo Brodie (Brooklyn) released her 88-page opinion on the matter on June 28, according to a report by Reuters. The judge called an estimated $6 billion in annual savings for merchants “paltry’ compared with the estimated $100 billion in fees they paid to accept Visa and Mastercard in 2023.

“Without evidence of Visa’s and Mastercard’s profitability, the court cannot say with certainty that defendants can withstand a greater judgment; however, the evidence strongly suggests that they could withstand a substantially greater judgment,” Brodie wrote in the published Reuters report.

During a June 13 hearing on preliminary approval of the proposed settlement, Brodie said she was unlikely to sign off, citing a number of concerns after multiple merchant trade associations said it would not provide sufficient relief.

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

Despite years of litigation, the four basis-point reduction would not come close to addressing the fact that the average swipe fee rate has grown two dozen basis points, from 2.02 percent, since 2010.

Credit and debit card swipe fees soared to a record $172.05 billion in 2023, up from $160.7 billion in 2022, according to the Nilson Report. They are most merchants’ highest operating cost after labor and are too much to absorb, driving up prices paid by the average family by over $1,100 a year.

Visa and Mastercard credit card swipe fees alone have nearly quadrupled since 2010 and totaled $100.77 billion in 2023.

Visa and Mastercard – which control 80 percent of the market – each centrally set the swipe fees charged by banks that issue cards under their brands, and also block transactions from being processed over other networks that could do the job with lower fees and better security. The CCCA would require banks with at least $100 billion in assets to enable cards they issue to be processed over at least two unaffiliated networks – Visa or Mastercard plus a competitor like NYCE, Star, Shazam or Discover.

Banks would choose which networks to enable but merchants would then decide which to use, resulting in competition over fees, security and service that is expected to save merchants and consumers over $16 billion a year. Rewards would not be affected, security would be improved, consumers would still use the same cards, and community banks and all but one credit union would be exempt.

The National Sporting Goods Association (NSGA) is a member of the Merchants Payments Coalition.