Visa, Mastercard Settle 21-Year Merchant Lawsuit

A federal judge in Brooklyn has given preliminary approval to a settlement between Visa, Mastercard, and a class of approximately 12 million merchants, concluding a lawsuit that has spanned over two decades. U.S. District Judge Brian Cogan found the agreement to be fair, reasonable, and adequate, stating it provides more extensive relief than a prior settlement that was rejected.

The approved accord aims to resolve litigation that began in mid-2005. While supported by the card networks and plaintiffs' attorneys, the settlement faced objections from some large merchants during an April 27 hearing. A spokesperson for Mastercard expressed anticipation for final closure, believing the agreement balances the interests of all parties. Visa also views the approval as a crucial step toward resolution, highlighting potential benefits like meaningful relief, increased flexibility, and payment acceptance options for merchants.

The settlement's terms include a 10 basis point reduction in credit interchange fee rates for five years, followed by an 8-year period with a 1.25% rate for standard consumer cards. Notably, merchants will gain the right to decline certain higher-cost Visa and Mastercard premium and commercial credit cards, ending the networks' long-standing 'honor all cards' policy. Additionally, merchants will be permitted to add surcharges and offer discounts to steer customers away from cards with higher interchange fees.