A Deal Looks No Closer In Merchants’ Long-Running Legal Battle Over Acceptance Fees

Merchant organizations contend an expected settlement offer in their ongoing, two-decades-old lawsuit against Visa Inc. and Mastercard Inc. over card-acceptance fees does not address the underlying problem that leads to high card-acceptance costs in the first place. Merchant opposition surfaced over the weekend after a story in The Wall Street Journal Saturday reported the card networks have prepared a revised offer to settle the lawsuit.

The latest offer comes more than a year after the networks’ initial offer to settle the suit was rejected by Judge Margo Brodie in June 2024.

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. In addition, merchants would receive wider latitude to impose surcharges on card transactions to help offset card-acceptance costs.

Merchant opposition to the expected settlement offer is driven by the networks’ failure to create a payments ecosystem that enables true pricing competition concerning acceptance costs, merchant groups argue.

“That’s the central problem, and the settlement does not address it,” says Doug Kantor, a Merchants Payments 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 calling for it to be rejected by the court.

Once the offer is presented to the court, plaintiffs will have a period in which to comment on it before the court rules to accept or reject the offer. 

One of the shortcomings of the proposed settlement, according to Kantor, are the rules to govern surcharging. Merchants will reportedly be able to impose surcharges on a specific card brand, but not on cards issued by specific financial institutions. The option to choose which issuers are subject to surcharges opens the door to negotiations between merchants and card issuers, which creates a more competitive playing field, Kantor says.

Not being able to negotiate with issuers 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?” Hunt says. “Pure greed is why the corporate megastores oppose the settlement.”

Hunts adds the EPC applauds both sides for agreeing to settle the case without a trial. He hopes the two sides can reach an agreement before Congress takes action on the matter, which he says would not benefit either party.

Whether the lawsuit will be settled out of court, however, remains a big question mark. “The nature of settlements is that neither party gets everything it wants,” Eric Grover, principal at Intrepid Ventures says by email. “As long as there are significant economics at stake, the war over payment acceptance fees will never end.”