A $30 billion settlement between Visa (NYSE:V), Mastercard (NYSE:MA) and retailers to cap credit-card swipe fees is likely to be rejected by a federal judge in Brooklyn, marking a setback in a litigation battle that has spanned two decades, Bloomberg News reported.
Judge Margo Brodie of the US District Court for the Eastern District of New York hinted during a hearing Thursday that she is unlikely to approve the deal, according to court records. Although Brodie has not officially ruled, she mentioned she would “issue a written decision” in the coming days, as noted in a summary of her courtroom comments.
Visa and Mastercard shares fell 0.8% and 0.6% in premarket trading Friday, respectively.
Retailers have long sought to reduce their share of the costs associated with accepting card payments, known as interchange fees. These fees are largely passed on to the banks that issue the cards, including major players like JPMorgan Chase (NYSE:JPM) and Citigroup (C).
The settlement, announced in March and pending court approval, would have allowed merchants to charge consumers extra for transactions involving Visa or Mastercard credit cards. It also included provisions to enable pricing tactics that steer consumers towards lower-cost cards.
“The court’s comments strongly suggest that she won’t accept the settlement,” said analysts at Bloomberg Intelligence.
“While Judge Brodie doesn’t seem convinced that larger retailers should be allowed to opt out from the settlement, provisions like changes to digital wallet acceptance rules and some state bans on surcharges likely present real adequacy issues.”
