Federal Judge Rejects $30 Billion Swipe Fee Settlement
Submitted by MAGA Student
Posted 2 days ago
Federal judge rejects $30 billion settlement between Visa, Mastercard, and retailers.
A federal judge in New York has rejected a proposed $30 billion settlement between Visa, Mastercard, and retailers over swipe fees. The ruling, made by Judge Margo Brodie of the U.S. District Court of the Eastern District of New York, means that the credit card processors will have to make more concessions to resolve their long-standing dispute with merchants.
The proposed settlement, which was reached in March, would have lowered swipe fees, or interchange fees, that a retailer must pay when a customer makes a purchase using their card. The fees typically amount to 2% of the total customer transaction, but they can be as much as 4% for some premium rewards cards.
Under the preliminary settlement, Visa and Mastercard denied any wrongdoing and agreed to maintain the swipe fee rates that existed as of Dec. 31, 2023, for a period of five years. They also agreed to remove anti-competitive restrictions so that merchants could suggest other preferred card options to customers going forward.
However, the proposed settlement was criticized by some retailers and trade groups, who argued that it would not provide a long-term solution to the issue of swipe fees. The National Federation of Independent Business, for example, viewed it as "temporary relief" for small businesses.
The Merchants Payments Coalition, which represents a range of retailers including supermarkets, retail chains, restaurants, drug stores, convenience stores, gas stations, and online merchants, blasted the preliminary settlement as being insufficient. Christopher Jones, an executive committee member of the coalition, said it would have enabled the credit card companies to "keep price-fixing swipe fees and blocking competition."
The Retail Industry Leaders Association, a trade group representing a slew of large retailers including Target, CVS, and Dollar General, similarly applauded Tuesday's ruling. "Leading retailers are grateful that Judge Brodie saw through the façade of the proposed settlement and understood that it would not provide the meaningful change that is needed to correct the competitive imbalance in the interchange ecosystem," the association said in a statement.
A Mastercard spokesperson told CNN that the company was "disappointed" by the ruling. "We believe the settlement presented a fair resolution of this long-standing dispute, most notably by giving business owners more flexibility in how they manage their card acceptance activities. We will pursue our options to ensure a proper resolution of this matter."
Visa did not immediately respond to CNN's request for a comment.
The ruling is a blow to Visa and Mastercard, who have faced criticism from retailers and lawmakers over their swipe fees for years. The fees have been a major source of revenue for the companies, but they have also been a point of contention for retailers, who argue that they are too high and that they limit competition in the payments industry.
The ruling is also a victory for small businesses, who have long argued that the swipe fees are a burden on their bottom line. Glenn Licht, owner of Pescatore Seafood Company in New York, said that he never believed that the $30 billion settlement would "trickle down" to him as a small merchant in a way that "would have been a game changer."
"I don't think the ruling will move the needle much on our financial statement," he said.
The ruling is likely to have far-reaching implications for the payments industry, as it could set a precedent for future disputes between retailers and credit card companies over swipe fees. It could also prompt lawmakers to take action to address the issue, as they have done in the past.
In 2010, for example, Congress passed the Durbin Amendment, which capped the swipe fees that banks could charge retailers for debit card transactions. The amendment was a major victory for retailers, who had long argued that the fees were too high and that they limited competition in the payments industry.
The ruling is also likely to be welcomed by conservatives, who have long been critical of the swipe fees and the power of credit card companies. In recent years, conservatives have called for more competition in the payments industry and for the fees to be lowered.
The ruling is a reminder that the issue of swipe fees is far from settled, and that it is likely to continue to be a source of controversy and debate in the years to come.
Sources:
ksl.com
qz.com
qz.com
A federal judge in New York has rejected a proposed $30 billion settlement between Visa, Mastercard, and retailers over swipe fees. The ruling, made by Judge Margo Brodie of the U.S. District Court of the Eastern District of New York, means that the credit card processors will have to make more concessions to resolve their long-standing dispute with merchants.
The proposed settlement, which was reached in March, would have lowered swipe fees, or interchange fees, that a retailer must pay when a customer makes a purchase using their card. The fees typically amount to 2% of the total customer transaction, but they can be as much as 4% for some premium rewards cards.
Under the preliminary settlement, Visa and Mastercard denied any wrongdoing and agreed to maintain the swipe fee rates that existed as of Dec. 31, 2023, for a period of five years. They also agreed to remove anti-competitive restrictions so that merchants could suggest other preferred card options to customers going forward.
However, the proposed settlement was criticized by some retailers and trade groups, who argued that it would not provide a long-term solution to the issue of swipe fees. The National Federation of Independent Business, for example, viewed it as "temporary relief" for small businesses.
The Merchants Payments Coalition, which represents a range of retailers including supermarkets, retail chains, restaurants, drug stores, convenience stores, gas stations, and online merchants, blasted the preliminary settlement as being insufficient. Christopher Jones, an executive committee member of the coalition, said it would have enabled the credit card companies to "keep price-fixing swipe fees and blocking competition."
The Retail Industry Leaders Association, a trade group representing a slew of large retailers including Target, CVS, and Dollar General, similarly applauded Tuesday's ruling. "Leading retailers are grateful that Judge Brodie saw through the façade of the proposed settlement and understood that it would not provide the meaningful change that is needed to correct the competitive imbalance in the interchange ecosystem," the association said in a statement.
A Mastercard spokesperson told CNN that the company was "disappointed" by the ruling. "We believe the settlement presented a fair resolution of this long-standing dispute, most notably by giving business owners more flexibility in how they manage their card acceptance activities. We will pursue our options to ensure a proper resolution of this matter."
Visa did not immediately respond to CNN's request for a comment.
The ruling is a blow to Visa and Mastercard, who have faced criticism from retailers and lawmakers over their swipe fees for years. The fees have been a major source of revenue for the companies, but they have also been a point of contention for retailers, who argue that they are too high and that they limit competition in the payments industry.
The ruling is also a victory for small businesses, who have long argued that the swipe fees are a burden on their bottom line. Glenn Licht, owner of Pescatore Seafood Company in New York, said that he never believed that the $30 billion settlement would "trickle down" to him as a small merchant in a way that "would have been a game changer."
"I don't think the ruling will move the needle much on our financial statement," he said.
The ruling is likely to have far-reaching implications for the payments industry, as it could set a precedent for future disputes between retailers and credit card companies over swipe fees. It could also prompt lawmakers to take action to address the issue, as they have done in the past.
In 2010, for example, Congress passed the Durbin Amendment, which capped the swipe fees that banks could charge retailers for debit card transactions. The amendment was a major victory for retailers, who had long argued that the fees were too high and that they limited competition in the payments industry.
The ruling is also likely to be welcomed by conservatives, who have long been critical of the swipe fees and the power of credit card companies. In recent years, conservatives have called for more competition in the payments industry and for the fees to be lowered.
The ruling is a reminder that the issue of swipe fees is far from settled, and that it is likely to continue to be a source of controversy and debate in the years to come.
Sources:
ksl.com
qz.com
qz.com
