Federal judge nixes $30 billion Visa, Mastercard settlement with retailers

### Federal Judge Rejects $30 Billion Swipe Fees Settlement Between Mastercard, Visa, and Retailers

A federal judge has formally rejected a preliminary $30 billion swipe fees settlement involving Mastercard, Visa, and U.S. merchants. The proposed settlement, reached in March, aimed to reduce interchange fees that retailers pay when customers use their cards.

### Details of the Ruling
Judge Margo Brodie of the U.S. District Court for the Eastern District of New York made the decision on Tuesday. Although the full details of her ruling were not disclosed, a memo indicated she was unlikely to grant final approval without changes to the preliminary settlement.

### Background of the Settlement
The settlement emerged from a long-standing antitrust class-action lawsuit filed in 2005. Merchants accused Mastercard, Visa, and the banks that issue their cards of colluding to set inflated swipe fees and restricting businesses from encouraging cheaper payment options. Under the preliminary agreement, Mastercard and Visa denied any wrongdoing but agreed to maintain the current swipe fee rates for five years and remove certain anti-competitive restrictions.

### Industry Response
Retailers are typically charged 2% of the transaction value in swipe fees, which can rise to 4% for premium rewards cards. The proposed settlement would have reduced these fees by 0.04 percentage points for at least three years.

However, the Merchants Payments Coalition (MPC), representing various large retailers, criticized the settlement as inadequate. Christopher Jones of the MPC stated that the settlement would allow credit card companies to continue “price-fixing swipe fees and blocking competition.” Similarly, the Retail Industry Leaders Association (RILA) praised the judge’s decision, arguing the settlement failed to address the competitive imbalance in the payment system.

### Mastercard and Visa’s Stance
Mastercard expressed disappointment with the ruling, believing the settlement was a fair resolution that provided business owners with more flexibility in managing card acceptance. Visa did not immediately respond to requests for comment.

### Impact on Small Businesses
Small businesses, such as Pescatore Seafood Company in New York, were awaiting the ruling with anticipation. Glenn Licht, the owner, highlighted how the shift from cash to credit card payments has significantly increased exposure to swipe fees, impacting profitability. Despite the significant potential payout, Licht was skeptical about the settlement’s benefits for small merchants, doubting it would have been a “gamechanger” for his business.

This ruling leaves the future of swipe fee regulations uncertain, with small and large retailers alike awaiting further developments.