Visa and Mastercard received preliminary approval Tuesday from a federal judge for a revised $38 billion settlement with merchants who accused the card networks of charging excessive fees to process credit card payments.
The settlement covers more than 12 million merchants, and Judge Brian M
Cogan said he expected to ultimately grant final approval, describing the terms as “fair, reasonable, and adequate.” The settlement, which Visa announced in November, would resolve claims stemming from litigation that began in 2005, when merchants accused Visa, Mastercard and banks of conspiring to violate U.S. antitrust laws through the collection of swipe fees, also known as interchange fees. As part of the agreement, swipe fees are set to drop by 0.1 percentage point over a five-year period, and rates on standard consumer cards would be held to a ceiling of 1.25% for eight years. Another provision breaks up the longstanding “Honor All Cards” rule by giving merchants the ability to selectively accept payment cards based on type — separating commercial, premium consumer, and standard consumer cards — rather than being forced to take every card in a network or none at all.
Merchants also received expanded options to impose surcharges on customers. Visa stock rose 1.7% and Mastercard stock rose 2% on Tuesday, according to Reuters. Cogan’s ruling came nearly two years after a different judge rejected a proposed $30 billion settlement as too small.