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Tuesday, June 25, 2024 - A federal judge in the massive Visa/MasterCard swipe fee litigation denied preliminary approval of a proposed settlement of the injunctive relief component of the case, which would have lowered interchange fees by at least four basis points for three years, and for five years thereafter, would have required rates to stay at least seven basis points below the average of 2.26 percent of the transaction amount. Visa and MasterCard also agreed to remove provisions prohibiting retailers from steering customers to less expensive cards and to give them more discretion to offer discounts and to impose surcharges.
Critics of the proposed settlement, including EMA, objected on a number of grounds, stating that the future fee reductions would provide only small and temporary relief and would not affect the rule that retailers must accept all cards or none. After five years, Visa and MasterCard would be free to raise rates and more than make up for the $30 billion in savings the companies claim retailers would realize as a result of the temporary rate reductions. Although the court’s decision is sealed, it is widely believed that Judge Brodie’s rejection of the proposed settlement at a preliminary stage indicates her view that it fails to provide any meaningful relief to the merchant class.
The court’s denial of the proposal to settle the injunctive relief component of the case should not be confused with the court’s earlier decision to approve the damages component, which was settled for over 5.6 billion dollars. That sum, which represents reimbursements for fees paid between 2004 and 2019, will be distributed to retailers who file claims before the August 30, 2024 deadline. The reimbursements for past payments will not be affected by the court’s June 25 decision.
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