A US federal judge has put on hold the $30 billion settlement by Visa and Mastercard with merchants alleging overpriced swipe fees, signaling a possible rejection, AP reported. The settlement, aimed at lowering and capping transaction fees, has faced opposition from major retail groups.

Legal Roadblock for Visa and Mastercard

Judge Margo Brodie, overseeing the case in the Eastern District of New York, has issued an order indicating skepticism towards finalizing the $30 billion agreement. This development comes after Visa and Mastercard's efforts to resolve a longstanding lawsuit dating back to 2005, which accused the payment giants and their member banks of antitrust violations through excessive transaction fees.

The proposed settlement, reached in March with a coalition of small businesses, promised to limit swipe fees and enable collective bargaining similar to larger retailers. However, its terms drew criticism from the National Retail Federation (NRF), which argued that the fee caps were inadequate and only offered temporary relief.

If Judge Brodie declines final approval, the case could proceed to trial, prolonging the legal battle and intensifying scrutiny on Visa and Mastercard's fee structures. The outcome will likely influence how payment processing fees are regulated and negotiated in the future, potentially reshaping dynamics within the industry.

Previously, Visa and Mastercard settled part of the lawsuit in 2018, agreeing to pay $6.2 billion to a group of 19 merchants. However, unresolved issues regarding card acceptance rules and non-participating merchants persisted, culminating in the current $30 billion proposal under judicial review.

Backlash from the National Retail Federation

Visa reached a settlement with US merchants to cut credit interchange rates and cap these rates until 2030 in an effort to end the nearly two-decade legal battle. This reduction in fees aimed to enhance the competitiveness of merchants, mostly small businesses, and result in substantial savings for them.

Additionally, the payment giants assured merchants that they would not hike the interchange fees for at least five years. Despite these proposals, the NRF rejected the settlement, terming it insufficient. According to the filing before Judge Brodie, the federation raised concerns over the agreement's fairness and lasting impact.

Elsewhere, the UK's payment regulator also raised concerns about the steep fee hikes imposed by Visa and Mastercard on retailers, which did not correspond to better services. As a result, the Payment Systems Regulator suggested new measures to enhance transparency and competition. Visa and Mastercard dominate the UK's payment card market, a situation that has led to growing scrutiny from lawmakers.