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Insights and Expertise

Potential impact of Visa, Mastercard

settlement on electronic payments

These fees, which totaled $172 billion in 2023 according to
the Merchants Payments Coalition, have more than dou-
bled over the past decade. The coalition represents a broad
array of retailers, grocers, convenience stores and gas sta-
tions, all of whom bear the brunt of these escalating costs.

The primary contention from retailers is that these fees,
which range from 1.5 percent to 3.5 percent per transac-
tion, significantly inflate their operating expenses. Inter-
change fee revenue, not including other fees tacked on by
processors, is funneled to the banks that issue the cards.
Moreover, merchants argue that Visa and Mastercard
have unlawfully prevented them from steering customers
toward cheaper payment alternatives.
Key provisions of the settlement
By Leo Arzumanyan
Global Legal Law Firm The March 26 settlement aimed to provide some relief to
merchants by allowing them to charge consumers extra
n a landmark case that has spanned nearly two for transactions involving Visa or Mastercard credit cards.
decades, the proposed $30 billion settlement This move would enable businesses to employ pricing tac-
between Visa Inc., Mastercard Inc. and retailers tics that encourage the use of lower-cost cards. The agree-
I aimed at capping credit-card swipe fees is now fac- ment included more than 90 percent of the settling mer-
ing potential rejection. chants, predominantly small businesses, highlighting the
widespread impact of the proposed terms.

According to a recent Minute Entry from the Court Dock- Additionally, the settlement proposed a reduction in the
et in In re Payment Card Interchange Fee and Merchant Dis- average interchange fee by at least 0.04 percentage points
count Antitrust Litigation (1:05-md-01720), a federal judge in for three years. It also included provisions to cap rates for
Brooklyn indicated on June 13, 2024, that the court would five years and eliminate anti-steering rules that currently
likely not approve the settlement. restrict merchants from guiding consumers toward less
expensive payment methods.
Specifically, the Minute Entry states, "The Court will is-
sue a written decision, but informed the parties that it Implications of the
will likely not approve the Settlement." This development settlement rejection
represents a significant setback in the prolonged litigation
battle over interchange fees, which has profound implica- If the settlement is ultimately rejected, it would represent
tions for the electronic payments industry and its various a major setback for retailers who have tirelessly fought to
stakeholders, including merchants, payment processors reduce interchange fees. The ongoing litigation has kept
and issuing banks. the spotlight on the contentious relationship between
merchants and the major credit card networks.
On June 25, the proposed settlement was indeed scuttled
by Chief Judge Margo K. Brodie of the U.S. District Court A rejection would likely mean prolonged legal battles
for the Eastern District of New York. and continued financial strain for businesses that already
grapple with high processing costs, including the follow-
Background of the settlement ing:

The proposed settlement, announced on March 26, 2024, • Merchants: Retailers, especially small businesses,
was designed to address numerous claims in a nationwide will face continued financial pressure from high in-
litigation effort spearheaded by retailers. These merchants terchange fees. The inability to pass on these costs
have long contended that Visa and Mastercard impose ex- to consumers or steer them toward cheaper payment
orbitant swipe fees, known in the industry as interchange methods will likely affect their profit margins and
fees, for processing credit and debit card payments. pricing strategies.

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