A federal judge on Tuesday approved a settlement that Visa and Mastercard reached with merchants who sued the networks more than two decades ago.
The agreement “provides more extensive relief” than a prior settlement that the court rejected in June 2024, U.S. District Judge Brian Cogan of the Eastern District of New York in Brooklyn said in his ruling, offering preliminary approval. The pact covers about 12 million merchants that were party to the class action.
“The Court’s responsibility is not to determine whether the settlement is ideal by class members’ varying standards, but whether it is fair, reasonable, and adequate,” Cogan wrote, finding that the agreement had met the threshold for approval.
The interchange fee settlement is aimed at ending 21 years of litigation on the matter. It is supported by the card networks and attorneys for the class of plaintiffs, with the litigation dating to mid-2005.
The ruling follows an April 27 hearing at which Cogan heard objections from several large merchants, including an attorney for Walmart, that do not support the settlement.
Mastercard looks forward “to moving closer to final closure of this matter,” a spokesperson said Tuesday. “We believe that this agreement delivers on the expectations of the court and balances the interests of all parties involved.”
A Visa spokesperson said the approval “represents an important step toward potential resolution of this decades-long litigation.” The proposed settlement will provide “merchants of all sizes with meaningful relief, more flexibility, and options to control how they accept payments from their customers.”
The proposed settlement would trim credit interchange fee rates by 10 basis points that’s applied to varying rates for five years and impose a 1.25% rate for standard consumer cards for eight years. It would also give merchants the right to decline some higher-cost Visa and Mastercard premium and commercial credit cards – a departure from the networks’ “honor all cards” rule.
In 2024, merchants paid a 2.35% fee on Visa and Mastercard transactions, according to a weighted average reported by the research organization Nilson Report last year.
Merchants would also gain new rights to add surcharges and offer discounts for cards as a way to steer customers away from cards with higher interchange fees. But large merchants argued that they can’t easily reject the premium cards issued by banks – which offer travel and cashback rewards and carry higher fees – because they are popular with customers.
While Cogan acknowledged that some of the objections offered by merchants who opposed the settlement had merit, he said his decision turned on a comparison to outcomes possible by trial.
“But the question is not whether the Amended Settlement constitutes the best possible recovery, end stop – it’s whether the Amended Settlement constitutes the best possible recovery in light of what can be gained and lost through trial,” Cogan wrote. “None of the objectors have persuaded the Court that they will, or even can, get more through trial.”
Two trade groups that represent the networks – the Electronic Payments Coalition and the Electronic Transactions Association – both hailed the preliminary approval.
The settlement “is a guaranteed win for Main Street and provides meaningful solutions for businesses and consumers,” Richard Hunt, the coalition’s executive chairman, said in an emailed statement. “Unfortunately, corporate mega-stores, their lobbyists, and their lawyers want to block this agreement to push untested, unworkable mandates that only further pad their profits.”
Doug Kantor, general counsel for the National Association of Convenience Stores, said Tuesday that “the vast majority of merchants out there across the country have concerns about the settlement.”
He said Cogan will see their disapproval “in even larger numbers” when the court considers final approval after a notice and comment period for the class. NACS will appeal to the 2nd Circuit U.S. Court of Appeals if Cogan grants final approval, Kantor said.
