Visa and Mastercard’s proposed $30 billion swipe fee settlement with merchants appears to be insufficient to prevent further litigation against the card payment networks, according to critics. The agreement, which aims to cap credit-card swipe fees and allow merchants to steer consumers towards less expensive payment options, is part of a resolution effort for multi-district litigation dating back to 2005. Despite the substantial projected savings of $30 billion in swipe fees for merchants over five years, several vocal critics, including Target Corp., Starbucks Corp., Foot Locker Inc., and Crate & Barrel, believe that the settlement falls short.
The central criticism from these retailers, which opted out of a previous $5.6 billion settlement in favor of pursuing their own cases, is the temporary nature of this relief. They argue that the agreement, which caps swipe fees for five years and prevents Visa and Mastercard from exceeding 2023 rates for this period, fails to provide any long-term solution. After this 5-year term, these companies would once again have the freedom to set their own swipe fees, potentially negating any short-term relief for merchants.
However, those in favor of the settlement argue that the relief provided would be ample for market forces to return to normal in the specified period. Steve Shadowen, lead attorney for the class of merchant plaintiffs, has expressed confidence that the market will be considerably more competitive after this period, meaning that litigation could be instigated again if any attempts were made to revert to earlier practices.
Notwithstanding the optimistic prediction, merchants are still concerned that the proposed settlement fails to eliminate some deeply-rooted issues with the business practices of the card companies. According to the National Retail Federation, the agreement leaves untouched the “honor all cards” rule, which mandates that merchants who accept any of the companies’ cards must accept them all. This rule is one that merchants have long been advocating to change, as it drastically limits their autonomy in selecting which cards to accept.
While the current situation remains uncertain, it seems clear that the proposed settlement faces an uphill battle in satisfying merchants. The financial relief, while significant in itself, may not fulfill its intended goal of staving off further litigation against Visa and Mastercard. Given these uncertainties, all eyes will be on the U.S. District Court in New York where In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, a case that could substantially affect the settlement, is currently pending.
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