Visa, Mastercard urge court to approve fee settlement

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Dive Brief:

• Visa and Mastercard contended in a court filing this week that merchants seeking to derail approval of a legal settlement over card swipe fees are recycling arguments they’ve made previously, and that the court has rejected. Some of the plaintiffs also have overestimated their prospects of winning at a trial, the card networks said.
• Even if merchants were to win the case, “it remains unlikely that the Court would order remedies anywhere near as extreme as those the objectors claim they want, particularly given their harmful effects on cardholders and on internetwork competition,” Visa and Mastercard attorneys wrote Wednesday in a joint reply to objections lodged against the pact. The filing comes a month before a federal judge plans to hold a final approval hearing on Nov. 16.
• The card networks also told the court that several large trade associations and Walmart “constitute no more than a vocal minority objecting to the settlement,” given the class size of more than 12 million members. “It is now clear that the concerns raised at preliminary approval and reiterated by largely the same objectors at final approval are nowhere near ‘pervasive,’” the companies wrote.

Dive Insight:

“Rather than offering any factual or legal basis why the Court should revisit and reverse its findings at preliminary approval, the objections merely reprise the same arguments this Court already considered and rejected,” Visa and Mastercard wrote in their support of final court approval.

The class counsel representing merchants also filed their reply to the merchants’ objections, on Wednesday, but they did so under seal. U.S. District Judge Brian Cogan told the lawyers to articulate by Monday proposed redactions to the filing so he could assess any need for confidentiality against the right of public access.

The class lawyers and networks’ attorneys reached the proposed settlement a year ago, with Cogan granting it preliminary approval in June, finding it superior to a 2024 settlement the court rejected. The litigation dates to 2005.

The latest settlement would trim credit interchange rates by 10 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 branded Visa and Mastercard premium and commercial credit cards. That would be a departure from the networks’ “honor all cards” rule requiring merchants to accept all cards from the networks if they accept any cards. 

In 2024, merchants paid a 2.35% fee, on average, on Visa and Mastercard transactions, according to industry 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 consumers travel and cashback rewards and carry higher fees – because they are popular with customers.

The card networks also contended that objections from the National Retail Federation and Retail Industry Leaders Associations should be discounted due to several of their member companies supporting the settlement.

“Given this context, the trade association objections should be afforded little (if any) weight, and the Court should not accept the implication that those objections reflect the views of the associations’ individual members,” Visa and Mastercard wrote.

If a trial were to move forward, the merchants would likely lose given the networks’ various arguments, Visa and Mastercard told the court. “The obstacles to achieving objectors’ preferred trial result are further compounded by the complexity of this case and the certainty that appellate litigation would follow from any judgment in favor of the class,” they said.

They also urged the court to reject Walmart’s “novel proposition” that the retailer should be allowed to opt out of the class because its inclusion constitutes an unjust taking of a legal claim.

Separately, the plaintiffs’ counsel filed an objection Thursday to a request for $36 million in legal fees from 18 merchant-plaintiffs who settled for damages from the networks in a related case over swipe fees.

That group of merchants – including Crate & Barrel Holdings, Dick’s Sporting Goods, The Gap and Yum! Brands – asked the court last month for “objector fees” for their role in helping to gain improvements for merchants between the current settlement and the one reached two years ago.

If granted, the fee award would reduce the class counsel’s proposed fees to $170 million for their work in the case.