Retailers Support Decision to Reject Swipe Settlement Deal
In response to U.S. District Judge Margo K. Brodie’s decision to reject the proposed Visa, Mastercard (b)(2) class settlement on swipe fees, the National Retail Federation (NRF), the Retail Industry Leaders Association (RILA) and the Merchants Payments Coalition (MPC) have expressed their approval of the move.
At a June 13 hearing on preliminary approval of the proposed settlement, Brodie revealed she was unlikely to give the go-ahead, citing several concerns after various merchant trade associations contended that it wouldn’t provide sufficient relief. On June 25, the judge issued a written order in which “the court finds that it is not likely to grant final approval to the settlement and accordingly denies plaintiff’s motion for preliminary settlement approval.”
Under the proposed agreement, Visa and Mastercard would have reduced credit card swipe fees – which averaged 2.26% of the transaction amount in 2023 – by a minimum of four basis points for at least three years. However, the settlement specifically allowed Visa and Mastercard to raise credit card network fees as much as they want at any time, thereby eliminating any reduction in swipe fees.
“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,” noted Stephanie Martz, chief administrative officer and general counsel at Washington, D.C.-based NRF. “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.”
“The credit card payment market has been broken for decades,” Washington, D.C.-based RILA said in a statement. “Leading retailers are grateful that Judge Brodie saw through the façade of the proposed settlement and understood that it would not provide the meaningful change that is needed to correct the competitive imbalance in the interchange ecosystem.”
The trade association added: “The fact that Visa/MasterCard agreed to a settlement proves that merchants deserve injunctive relief – but the rules changes must actually level the playing field for all parties. The proposed settlement did nothing of the kind. Leading retailers are relieved the settlement deal has been rejected so that the next steps in this long-fought legal battle can move forward.”
“Visa and Mastercard wanted a settlement that would let them keep price-fixing swipe fees and blocking competition,” said MPC Executive Committee member and National Grocers Association Chief Government Relations Officer and Counsel Christopher Jones. “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.”
All three groups are in favor of Congress passing the Credit Card Competition Act, a bipartisan bill that would require banks with at least $100 billion in assets to permit cards they issue to be processed over at least two unaffiliated networks – Visa or Mastercard plus a competitor such as NYCE, Star, Shazam or Discover. As RILA put it: “The credit card payment system will remain dysfunctional until federal legislation is passed. Congress should not allow this case to be a distraction from passing the Credit Card Competition Act to bring true competition to a broken market.”
Credit and debit card swipe fees are most retailers’ highest operating cost after labor, and are too much to absorb, increasing prices paid by the average family by more than $1,100 annually. Visa and Mastercard credit card swipe fees alone have nearly quadrupled since 2010 and came to $100.77 billion in 2023.
Visa and Mastercard – which control 80% of the market – each centrally set the swipe fees charged by banks that issue cards under their brands, and also prevent transactions from being processed over other networks that could do the job with lower fees and better security.
NRF is the world’s largest retail trade association, with around 18,000 members; RILA members include more than 200 retailers, product manufacturers and service suppliers, which together account for more than $2.7 trillion in annual sales; and the MPC represents retailers, supermarkets, convenience stores, gasoline stations, online merchants and others that want a more competitive and transparent card system.
