Dive Brief:

• Merchants wrongly discount the value of “sweeping concessions” made by Visa and Mastercard on fee cuts and other major card acceptance changes in a proposed settlement to end decades of litigation over card interchange costs, the card networks said Wednesday in a federal court filing.
• Retailers, including Walmart, grocers and convenience stores, face “significant risks” proving their antitrust claims at trial and on appeal, the networks wrote in their reply to numerous objections from the merchant plaintiffs. Visa and Mastercard asked the court for preliminary approval of the settlement.
• In their filing, the networks also asked U.S. District Judge Brian Cogan to reject Walmart’s request to divide the plaintiff’s class or to allow merchants to opt out. “Walmart’s interests were adequately represented by class counsel, and, to the extent it disagrees with the outcome, it will be fully heard by this Court through the settlement approval process,” Visa and Mastercard wrote. “Nothing more is required.”

Dive Insight:

The proposed settlement, announced in November, would cut posted credit interchange rates by ten basis points 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-branded credit cards – a departure from the networks’ “honor all cards” rule – and the ability to add surcharges on some cards.

“Visa and Mastercard have agreed to sweeping concessions for which Plaintiffs have long advocated, allowing merchants greater flexibility both in choosing which payment forms to accept and in managing their costs of acceptance,” the networks wrote in their 47-page reply, filed Wednesday evening in the Eastern District of New York.

The networks, which are the defendants in the case, also cast doubt on the plaintiffs’ assessment of potential outcomes if the case goes to trial. “The proposed settlement accords with, and in certain ways exceeds, Plaintiffs’ best possible recovery at trial, while allowing merchants to obtain relief immediately and without any of the delay, costs, and risks associated with prolonged litigation,” the filing said.

The merchants’ objections filed last month focus broadly on the temporary aspect of the settlement’s fee caps over an eight-year term. They also criticized the fact that the settlement doesn’t require more fundamental changes in how the networks unilaterally impose default swipe fees on most merchants.

Multiple merchants, including Walmart, the largest U.S. retailer, have also said that changes to the networks’ “honor all cards” rules would be functionally meaningless. That’s because so many of their customers use more expensive “premium” credit cards – to amass loyalty points and miles – and they could not decline those cards.

That argument “ignores the tools that merchants will have to shift volume from premium to standard cards,” the networks said, including adding surcharges for premium cards and offering customers discounts for using lower-cost cards.

 “For some of the objectors, nothing short of dismantling the Visa and Mastercard networks and the foundations on which they were built—including repealing the Honor-All-Cards rules at the issuer level (relief for which Plaintiffs do not even advocate), and abolishing the setting of default interchange—would be sufficient,” Visa and Mastercard wrote in their reply.

The settlement follows a federal judge’s rejection in June 2024 of a prior pact merchants had reached with the two largest U.S. card networks.