A dispute between both Visa and Mastercard and their merchants that has dragged on for nearly 20 years briefly appeared to have a resolution this year, but a U.S. District Court opinion sent them back to the drawing board.
Litigation between merchants and the two card networks began in 2005 over claims of anticompetitive practices around interchange fees—also called "swipe fees," referring to the cost merchants pay to card companies per transaction with their cards. Such fees are the primary fuel for corporate card rebate programs and other rewards programs.
The settlement, announced in late March, called for the networks to both reduce interchange fees and cap them for five years, which was estimated to bring about $30 billion in savings to merchants over that period. Analysts and card companies indicated they did not see that concession as something that would have a big effect on rebate and rewards programs.
Merchants were not united in acceptance of that deal. The National Retail Federation, for one, wrote a letter to U.S. District Judge Margo Brodie, before whom the settlement awaited approval, saying the interchange reductions were too small and that other parts of the settlement were "impracticable or meaningless."
In an opinion issued in June, Brodie denied a motion for preliminary approval of the settlement and said the court "is not likely to grant final approval to the settlement." One of the key points in her opinion was that the settlement disproportionately helped smaller merchants who were represented as plaintiffs in the settlement.
Whether the rejection of the settlement results in a trial or a revised settlement remains to be seen. The card networks also still face the possibility of regulation via the Credit Card Competition Act, which would require large issuers to enable at least two card networks on their cards—at least one of those not being Visa or Mastercard—to break up their market share. While the bill remains stalled in the U.S. Senate, it's notable that Vice President-elect J.D. Vance was among its original sponsors. Analysts said an approved settlement would have further slowed efforts toward that legislation.
Whatever happens, it doesn't appear the long-running dispute will be settled anytime soon.