Wednesday, August 7, 2024
Merchants have been battling the card brands and card-issuing banks over interchange and related issues for more than a generation. A class-action lawsuit filed in 2005 was settled in part back in 2018, leading to settlement valued at $6 billion that was to be divvied up among about 12 million merchants.
But several million merchants opted out of the settlement and other issues in the lawsuit were left unresolved.
A second settlement proposal was floated recently that would have addressed concerns of merchants who opted out of the original settlement and ushered in rule changes merchants had sought. However, the proposal was rejected this June by a judge overseeing the case in U.S. District Court for the Eastern District of New York.
Mastercard CEO Michael Miebach was asked about the path forward during a July 31, 2024, call with analysts. He said the company is bent on finding an out-of-court solution, although he conceded it is "difficult to speculate" about exact outcomes.
"We are obviously ready, and we will take all efforts to ensure that a solution is found before this goes to trial," he said. "I think this intention to lean in and see how we can provide more security, predictability to merchants and to banks and our parties here is what's driving us."
The settlement proposal that was rejected by the court would have lowered interchange by four basis points, put the brakes on interchange hikes for four years, eliminated anti-steering rules and simplified rules around surcharging.
Miebach's comments seemed to echo those of Visa CEO Ryan McInerney, who spoke with analysts in a July 23 call. He stated that the proposed settlement had "provided meaningful relief to all merchants and we will continue to work toward another settlement."
McInerney said the court, in rejecting the proposed settlement, "failed to take into consideration a number of things, especially the multisided ecosystem that we operate in," as well as "the complicated role" that different participants play.
All that being said, McInerney told analysts that a "revised settlement" was in the works. "It's too early to speculate on what that settlement is. So, I won't do that today," he said. "But I would ask everybody to keep in mind a settlement can occur at any point before, during or even after the trial. So, keep that in mind as the process plays out." 
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