The National Retail Federation (NRF) welcomed a federal judge’s decision today to reject the proposed settlement of a class-action antitrust lawsuit concerning "swipe" fees charged to merchants for processing Visa and Mastercard credit card transactions.

"This settlement was never agreed to by the retail industry as a whole and would have done nothing to end anticompetitive practices and fix our nation’s broken payments market," said NRF Chief Administrative Officer and General Counsel Stephanie Martz. "The proposed reduction in swipe fees was tiny and temporary and ignored the underlying issue of how these fees are centrally set rather than allowing banks to compete to offer the best rates. We’re glad the judge has seen this backroom deal for what it is so we can move forward to real relief from these ever-increasing fees that drive up costs for small businesses and prices for American families."

U.S. District Judge Margo Brodie issued an order stating, "the court finds that it is not likely to grant final approval to the settlement and accordingly denies plaintiff’s motion for preliminary settlement approval." This order followed remarks Brodie made during a June 13 hearing where she expressed concerns after NRF and other merchant groups argued that the settlement would not provide adequate relief.

In April, attorneys for NRF wrote a letter to Brodie asserting that the proposed settlement failed to end Visa and Mastercard's practice of centrally setting swipe fees charged by all banks issuing their cards. The letter also highlighted that it did not reverse a controversial "honor all cards" rule requiring merchants to accept all cards from each network regardless of fees.

Announced in March, the proposed settlement of the 19-year-old lawsuit included provisions where Visa and Mastercard would reduce rates for each swipe fee category by four basis points for three years and average rates by seven basis points for five years. However, with current credit card swipe fees averaging 2.26% of transactions – 226 basis points – NRF described the proposed reduction as "a drop in the bucket."

While this rate reduction could have saved merchants an average $6 billion annually, it came against a backdrop where Visa and Mastercard credit card swipe fees totaled $100 billion last year. Additionally, since the agreement applied only to “interchange” fees going to card-issuing banks, Visa and Mastercard retained freedom to raise “network” fees they receive, potentially offsetting any savings.

Other parts of the settlement were deemed “impracticable or meaningless,” including a provision allowing merchants to impose surcharges on customers using premium cards with higher-than-average swipe fees. The agreement promised only temporary relief but included a "virtually limitless" ban on future merchant litigation over swipe fees without an opt-out provision for dissenting merchants.

The letter attributed these shortcomings largely to attorneys representing five small businesses who claimed to represent the entire retail industry but had "effectively frozen us out" despite repeated offers by NRF to assist.

With this settlement failing significantly on addressing swipe fee issues, NRF continues advocating for Congress's passage of the Credit Card Competition Act. This bipartisan bill aims at mandating large banks enable alternative processing networks on Visa and Mastercard credit cards, fostering competition over fees, security, and service.

About NRF

The National Retail Federation passionately advocates for people, brands, policies, and ideas aiding retail success. Headquartered in Washington D.C., NRF supports an industry contributing $5.3 trillion annually to GDP while employing more than one in four U.S. workers—55 million Americans—and has been representing retailers' voices globally for over a century.

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