Judges’ Antitrust Scrutiny Grows With Nixed Visa-Mastercard Deal

A $30 billion settlement between Visa Inc., Mastercard Inc. and retailers to cap credit-card swipe fees is the latest antitrust deal to be shut down by a judge, underscoring the high standards courts use to ensure fair compensation for plaintiffs.

The Tuesday decision from Judge Margo Brodie of the US District Court for the Eastern District of New York thwarts a proposal sharply criticized by many merchants saying the settlement, despite its hefty dollar figure, didn’t go far enough to impose systemic changes to the way Visa and Mastercard operate, especially with small businesses.

The judge’s refusal to sign off on what appeared to be a substantial monetary win for retailers that accept Visa or Mastercard debit or credit cards as payment is among a string of recent court findings criticizing antitrust settlements, showcasing judges’ increasing skepticism over whether plaintiffs are fairly compensated.

Brodie wasn’t convinced the settlement was sufficient in light of the claims, Steig Olson, attorney with Quinn Emanuel Urquhart & Sullivan LLP, said.

“It’s not like the judge is saying, ‘This is close,’” Olson said. “My read of the court is that she thinks these cases are ready for trial.”

While a trial could be on the horizon, Visa and Mastercard may also try to rework the deal with the knowledge that their $30 billion attempt—which didn’t impose a permanent cap on the fees—fell short. Brodie ordered the parties to confer and respond to the ruling by June 28.

Convincing the Judges

Brodie’s decision comes after a series of similar rulings rejecting companies’ proposals to resolve antitrust litigation.

Judge James Donato in California rejected a $700 million settlement brokered by Alphabet Inc.‘s Google and state attorneys general over the Google Play app in March. He was unsatisfied with the deal’s proposed payout to consumers and how it would essentially release the Google Play Store from any legal claims for the next seven years.

Another federal judge this week denied deals worth $38.5 million in a case accusing Formosa Plastics Corp., Westlake Chemical Corp. and other defendants of price-fixing. And a Nevada federal judge voiced concerns this month over some aspects of the Ultimate Fighting Championship’s $335 million settlement with fighters pursuing suppressed wages claims. Judge Richard Boulware will hold a hearing on the UFC case July 12.

“Judges are looking at settlements and expecting them to provide real relief,” said Christine Bartholomew, a law professor at the University at Buffalo.

“Any settlement [with Visa and Mastercard] that is going to pass muster before a court is going to have to show a significant impact on the actual fees, and it can’t just be for a limited duration,” she added.

Bartholomew and others weren’t surprised the proposed swipe fee deal tanked, saying merchants long complained it didn’t go far enough largely because nothing stands in the way of the companies raising the fees again. The deal would cap swipe fees for five years, during which time Visa and Mastercard can’t go above rates that existed at the end of 2023.

“The terms of the settlement were going to be somewhat of an uphill battle,” Bartholomew said.

The judge raised concerns at a June 13 hearing on the proposed settlement, saying she was “troubled” by the deal and that “nothing that I’ve heard today has changed my mind that, in fact, this settlement should be approved.”

The credit card companies had previously said they were disappointed by the judge’s stated intention to reject the deal.

Visa and Mastercard might try to renegotiate the deal with disgruntled merchants, said George A. Hay, professor of law and economics at Cornell Law School and who previously served as director of economics at the Justice Department’s Antitrust Division.

“They will go back and talk to the merchants who complained and say, ‘What can we do to make this right?’ How can we sweeten the pot?’” Hay said. “The alternative is to say ‘OK, we’ll litigate.’ I don’t think anybody wants to litigate the whole thing.”

Brodie’s decision received praise from the Merchants Payments Coalition, a Washington, D.C.,-based group of retailers advocating for competition in the payments market that believes the deal would have been bad for small business merchants and their customers.

“We’re glad to see that the judge recognized the inadequacies of the settlement,” said Doug Kantor, member of the coalition’s executive committee. “There is really no relief from the central claims of the case. It didn’t change the central tenets of how Visa and Mastercard do business.”

The case is In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, E.D.N.Y., No. 1:05-md-01720, 6/25/24.