Visa·Master-Merchants, Fee Lawsuit Settlement... Court Puts the Brakes

The settlement proposal regarding card fees between U.S. card companies Visa and MasterCard and merchants is expected to be blocked by a federal court, Bloomberg reported on the 13th (local time).

Margot Brodie, a judge at the U.S. District Court for the Eastern District of New York, indicated at a hearing that she is likely not to approve the settlement between Visa, MasterCard, and the merchants. Bloomberg reported, "Although Judge Brodie has not made an official ruling, she is expected to issue a written decision rejecting the settlement within the next few days." The specific reasons were not disclosed.

Earlier in March, Visa and MasterCard agreed to reduce the fees charged to merchants by at least 0.04 percentage points over the next three years and to lower the average card fees across both companies' payment systems by 0.07 percentage points from current levels over five years. Additionally, merchants were allowed to charge customers paying with Visa or MasterCard separately and adjust those charges according to the fee rates for each card.

This proposal came after some merchants filed lawsuits against Visa and MasterCard in 2005, claiming that the card companies' fee rates violated antitrust laws.

Experts speculate that the federal court's intervention is due to some parts of the settlement potentially violating the law. Justin Teresi, an analyst at Bloomberg Intelligence, assessed, "Provisions such as the prohibition of additional fees implemented by some state governments likely raise questions about the actual validity of the settlement."

Although the agreement between the card companies and merchants was difficult to reach after more than 20 years, it received mixed reviews. Some retailers argued that the fee reduction rate was too low to be effective, and consumers expressed concerns that the fee burden might increase depending on the type of credit card used.

Visa and MasterCard stated in a press release that they will continue to cooperate with merchants to reach an appropriate agreement.

Meanwhile, the merchant industry participating in the settlement estimated that if the agreement is implemented, merchants could save $30 billion (approximately 40 trillion won) in card fees over five years.