Merchants Reject Visa-Mastercard Settlement in Fee Dispute

Merchant organizations are evaluating an expected settlement offer from Visa Inc. and Mastercard Inc. in their long-running lawsuit over card-acceptance fees, but the proposal appears unlikely to satisfy plaintiffs who argue it fails to address the root cause of high processing costs. The merchant opposition emerged after The Wall Street Journal reported on Saturday that the card networks have prepared a revised settlement offer to resolve the case, which began more than two decades ago.

Settlement Details and Merchant Concerns

The new offer reportedly calls for Visa and Mastercard to lower swipe fees by 0.1 percentage points over a multi-year period. Merchants would also reportedly be allowed to choose whether to accept cards in specific categories, such as rewards, premium, standard, and commercial cards, as opposed to having to follow the honor-all-cards rule. Additionally, merchants would gain broader authority to impose surcharges on card transactions to offset acceptance costs. However, merchant groups contend these changes do not create a competitive ecosystem for determining acceptance fees.

“That’s the central problem, and the settlement does not address it,” said Doug Kantor, a Merchants Payment Coalition executive committee member and general counsel for the National Association of Convenience Stores. “[The central problem] remains the reason why the lawsuit was brought in the first place.” The MPC, NACS, and the National Retail Federation issued statements Sunday opposing the expected settlement and urging the court to reject it.

Surcharging Limitations and Competitive Friction

According to Kantor, one key limitation of the proposed settlement involves the rules governing surcharging. The offer would allow merchants to impose surcharges on transactions by specific card brands but not by individual financial institutions. Kantor argues that permitting merchants to negotiate surcharges with particular issuers would introduce competitive friction the lawsuit originally sought to address. The inability to negotiate directly with issuers, he claims, creates “competitive friction, which is a dynamic the lawsuit was intended to address,” Kantor adds.

If the offer is not approved, blame will fall squarely on the merchants, argues Richard Hunt, executive chairman of the Electronic Payments Coalition. “Retailers and the card companies agreed to enter into a settlement, and if the offer is rejected, it will be the second time in less than two years an offer has been rejected. How can retailers reject an offer before reading it?” Whether the lawsuit will be settled out of court, however, remains a big question mark.

Uncertain Path Forward

The lawsuit’s future remains unclear regardless of the settlement’s outcome. Once presented to the court, plaintiffs will have time to comment before a ruling is issued. If the offer is not approved, the legal battle could continue. “The nature of settlements is that neither party gets everything it wants,” said Eric Grover, principal at Intrepid Ventures. “As long as there are significant economics at stake, the war over payment acceptance fees will never end.” Grover’s email response highlights the persistent economic stakes driving the dispute between merchants and payment networks.