Judge Rejects Settlement Offer By Mastercard And Visa

On Tuesday, a federal judge rejected Visa and Mastercard’s $30 billion settlement offer to a select group of retailers in an antitrust class action lawsuit. According to the retailers, the card companies charge a high fee for every transaction they make. Mastercard and Visa, which are two of the biggest card companies in America, reached a preliminary agreement in March 2024 to reduce fees. 

As part of a preliminary agreement between the card giants and the retailers, the card companies agreed to lower their fees by 4 basis points and keep them unchanged for the next three years. They also agreed to cap their fees at the levels of 2023 for the next five years. Although the full judgment is not yet available, it is expected that the court will not allow the settlement offer to go forward.

The senior Vice President of Communications at Mastercard, Seth Eisen said, “As we noted earlier this month, we are disappointed by this development. 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.” A visa spokesperson also spoke on the matter and said, “We continue to believe that the proposed settlement agreement was the appropriate resolution resulting from lengthy and thoughtful discussions with the merchant class.”

However, the agreement proposed by the card companies in March, which outlined the lowering of fees, was not received very well by retail industry groups as they believe that the offer is merely temporary relief and not a long-standing solution to a systematic problem. 

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Many people believe that to counter the monopoly of card giants like Mastercard and Visa, Congress must pass the Credit Card Competition Act, which would allow new players to enter the market and reduce the dominance of Mastercard and Visa. 

Visa and Mastercard control 80% of the total business transactions that take place in the country, which is a huge part. Moreover, they charge 2.24% on every transaction, which can go as high as 4% at times. The leader of the retail association said, “The credit card payment market has been broken for decades. 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.

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