Key facts
- U.S. District Judge Brian Cogan granted preliminary approval to a revised $38 billion settlement.
- The settlement resolves a 2005 lawsuit accusing Visa and Mastercard of violating U.S. antitrust laws.
- The revised deal includes a five-year reduction in swipe fees by 0.1 percentage point.
- Standard consumer rates would be lowered to no more than 1.25% for eight years.
- Merchants would gain more options to impose surcharges and choose which card categories to accept.
- Supporters estimate the changes could save merchants $38 billion by 2031.
U.S. District Judge Brian Cogan has granted preliminary approval to a revised $38 billion settlement between Visa, Mastercard, and merchants who alleged the card networks violated antitrust laws by charging excessive "swipe fees" for processing payments. This decision comes nearly two years after a previous $30 billion settlement was rejected by a different judge as insufficient.
The lawsuit, initiated in 2005, accused the card networks and associated banks of conspiring to inflate fees. The newly proposed settlement aims to end this protracted legal battle.
Under the terms of the revised agreement, Visa and Mastercard are set to lower swipe fees by 0.1 percentage point for five years. Additionally, standard consumer credit card rates will be capped at 1.25% for eight years. A significant change includes offering merchants more flexibility to impose surcharges on customers and to choose whether to accept specific categories of cards, such as commercial, premium consumer, or standard consumer cards. This provision is intended to end the "Honor All Cards" rule, which mandated merchants accept all cards from a network or none.
Supporters of the settlement, including the Electronic Payments Coalition and economists Joseph Stiglitz and Keith Leffler, believe these changes could save merchants approximately $38 billion by 2031 and yield overall benefits of $224 billion. They argue the settlement effectively ends the "Honor All Cards" rule.
However, several trade groups, including the National Retail Federation and the Merchants Payments Coalition, along with major retailers like Walmart, have objected to the settlement. They contend that the proposed fee reductions are illusory and that the settlement allows Visa and Mastercard to continue anticompetitive practices. Objectors argue that merchants will still be compelled to "honor all issuers" within a network, limiting their ability to refuse certain banks' cards, and that the settlement locks in conduct that has persisted for over three decades without adequate challenge.