Business

Judge rejects Visa, Mastercard’s multibillion-dollar settlement in sweep fee case

A federal judge on Tuesday rejected a $30 billion antitrust settlement under which Visa and Mastercard agreed to cap the fees they charge merchants that accept their credit and debit cards.

U.S. Judge for the Eastern District of New York Margo Brodie in Brooklyn said she was unlikely to grant final approval to the settlement and therefore denied the request for preliminary approval made by a group of merchants composed of mainly small businesses.

The settlement was opposed by many retailers and trade groups, including the National Retail Federation. Opponents argued that card fees would remain too high under the deal, while Visa and Mastercard would retain too much control over card transactions.

The judge’s ruling could force Visa and Mastercard to negotiate a new, more merchant-friendly deal or go to court and face an uncertain outcome.

EBAY DROPS AMERICAN EXPRESS AS PAYMENT OPTION THIS SUMMER

Judge rejects Visa, Mastercard’s multibillion-dollar settlement in sweep fee case

A federal judge has rejected the proposed settlement in Visa and Mastercard’s latest sweep fee case. (Karol Serewis/SOPA Images/LightRocket via Getty Images / Getty Images)

Merchants and card networks will have until June 28 to request the removal of a written opinion that Brodie will draft to explain his reasoning for the decision.

National Retail Federation Executive Director and General Counsel Stephanie Martz said of the ruling that “this settlement was never accepted by the retail industry as a whole and would have done nothing to stop anti-competitive practices and repair our country’s broken payments market. »

Teleprinter Security Last Change Change %
V VISA INC. 273.69 +0.03 +0.01%
MY MASTERCARD INC. 452.43 -3.23 -0.71%

Visa issued a statement on June 13 saying it was disappointed with the court’s position on the proposed settlement when the judge signaled she was likely to reject the settlement, and that she believed in continuing the engagement. between industry and traders in the future.

Mastercard did not immediately respond to a request for comment.

FINANCIAL DANGERS OF STORE CREDIT CARDS CAN BE “SEVERE”, EXPERT WARNS

An individual using a credit card reader

Swipe fees are charged per transaction, and card issuers often use the proceeds to fund rewards programs. (Robert Nickelsberg/Getty Images/Getty Images)

The settlement, announced March 26, was intended to resolve most of the disputes that began in 2005 over swipe fees that merchants pay to accept Visa and Mastercard and that are set by the card networks.

These fees typically represent between 1.5 and 3.5 percent of each transaction and total approximately $72 billion in 2023, according to the Nilson report. These fees generate profits for banks and other card issuers, who funnel many fees into rewards programs that encourage consumers to spend more.

WALMART, EXCLUSIVE CONSUMER CREDIT CARD AGREEMENT CAPITAL ONE END

Several credit cards placed on the table

Visa and Mastercard cards could be judged following the judge’s rejection of the proposed settlement. (Photo by Matt Cardy/Getty Images/Getty Images)

The agreement calls for average sweep fees to fall to at least 0.04 percentage points for three years and remain at least 0.07 percentage points below the current average for at least five years.

Visa and Mastercard also agreed to cap rates for five years and remove anti-steering provisions that prevent merchants from steering customers to cheaper cards, while merchants would have been given more leeway to offer discounts or impose surcharges under the proposed regulations.

Many merchants have opposed rules prohibiting them from explaining to customers why certain cards cost more than others, as well as steering customers to cheaper cards.

GET FOX BUSINESS ON THE GO BY CLICKING HERE

The judge’s ruling does not impact a previous $5.6 billion settlement over swipe fees in a class-action lawsuit between Visa, Mastercard and about 12 million merchants.

Reuters contributed to this report.

News Source : www.foxbusiness.com
Gn bussni

Back to top button