NOTE: The settlement described below concerns the Equitable Relief Class component of In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, MDL No. 1720 (E.D.N.Y.). It does not relate to the $5.54 billion settlement that the Rule 23(b)(3) Class Plaintiffs obtained in the same multidistrict litigation. The Rule 23(b)(3) Class settlement, also referred to as the “Superseding Settlement,” is final. Accordingly, the district court’s rejection of the settlement proposed by the Equitable Relief Class Plaintiffs does not impact the ongoing administration of the Superseding Settlement or the proofs of claim that FRS is managing for our clients to recover from it.
On June 25, 2024, United States District Court Judge Margo K. Brodie, who is overseeing the Payment Card multidistrict litigation sometimes known as “MDL 1720,” rejected the settlement proposed by the Equitable Relief Class Plaintiffs that they valued at approximately $30 billion. The district court’s rejection, which adds a new chapter to the ongoing conflict over these fees, will require Visa and Mastercard to either improve their offer or face a trial.
What Was Proposed?
In March 2024, the Equitable Relief Class Plaintiffs proposed a settlement to address the high interchange fees, commonly known as swipe fees, that Visa and Mastercard charge merchants when customers use their credit and debit cards. Those fees usually fall between 1.5% and 3.5% per transaction but can be as high as 4% for premium rewards cards. Unlike the now-final Superseding Settlement obtained by the Rule 23(b)(3) Class, the proposed Equitable Relief Class settlement did not provide for a settlement fund and no monetary recovery would be available to merchants; instead, the proposed Equitable Relief Class settlement provided for prospective cost savings as a result of reduced fees in the future. The proposed Equitable Relief Class settlement aimed to reduce those fees by at least 0.04 percentage points for three years and keep them at least 0.07 percentage points below the current average for five years. The proposed settlement also allowed merchants to add surcharges based on the type of Visa or Mastercard used, which would likely impact cardholders with rewards cards, such as those offering cash back and airline miles, typically associated with higher fees. Many merchants and trade groups, including the National Retail Federation, opposed the settlement, arguing that it didn’t do enough to lower fees and left too much control in the hands of Visa and Mastercard.
Reactions and Future Steps
Visa and Mastercard expressed disappointment with the ruling, arguing that the proposed settlement provided a fair resolution and increased flexibility for business owners. However, many small businesses and trade groups welcomed the decision. The Merchants Payments Coalition, which includes a variety of retailers, restaurants, and gas stations, argued that the proposed settlement would have allowed credit card companies to continue fixing prices and blocking competition.
What’s Next?
With the proposed settlement rejected, Visa and Mastercard will need to renegotiate the terms or prepare for a trial. Meanwhile, some U.S. senators are pushing for the Credit Card Competition Act, which aims to allow merchants to use other payment networks for processing Visa and Mastercard transactions, which would potentially increase competition and lower fees. The rejection of the settlement proposed by the Equitable Relief Class does not affect the Superseding Settlement, which was upheld by a federal appeals court in March 2023.
The Bottom Line
The swipe fee issue remains unresolved, with merchants hoping for a more favorable deal that lowers their costs and gives them more control over payment options. Whether through further negotiations or new legislation, the goal is to create a fair and competitive system for processing credit card transactions.
Claim forms have been delivered and have been available online since December 1, 2023. Class members need not sign up for a third-party service in order to participate in any monetary relief. No-cost assistance is available from the Class Administrator and Class Counsel during the claims-filing period. For additional information, class members may visit the Court-approved website at www.PaymentCardSettlement.com, or contact Class Counsel or the Class Administrator. Please understand that you have the right to file on your own.