Mastercard’s U.S. fee settlement is approved | PaymentsSource

A fee dispute between Mastercard and merchants in the U.K. appears to have a resolution, a rarity in such fights, which often drag for years with settlements getting rejected.

The U.K. Competition Tribunal has approved an approximately $251 million settlement between Mastercard and Walter Merricks, the leader of a U.K. $12.5 billion class action suit in 2016 that accused the card network of overcharging consumers. The tribunal called the settlement “just and reasonable,” though it also said it was “very disappointing” compared with the original claim. Visa settled a U.K. interchange suit in 2021.

Visa and Mastercard have often pushed for settlements in card-fee cases. Mastercard expressed satisfaction with the Competition Tribunal’s ruling. 

“We welcome the Tribunal’s decision,” said Mastercard’s public relations office in an email. “We will continue to focus on providing consumers and businesses with what they expect from Mastercard — a great payments experience, strong value and peace of mind.”

Innsworth Advisors, the firm that funded the U.K. case, did not return a request for comment on the tribunal’s decision. Innsworth had challenged the Mastercard U.K. settlement, claiming it undervalued the claim. 

That ends the U.K. Mastercard/Merricks battle, though payment experts say the impact likely won’t travel well. If the nine-year U.K. payment fee battle sounds like a long time, it’s actually relatively short when compared with a similar fight in the U.S.

“I don’t think that the approval of Mastercard’s settlement of a class-action suit in the U.K. will affect the prospects of settling the longstanding consolidated antitrust suit against Mastercard and Visa in the U.S. over their credit interchange fees and acceptance fees,” Eric Grover, a principal at Intrepid Ventures, told American Banker.

Visa and Mastercard have been fighting with U.S. merchants over payment fees for at least 20 years through a series of court cases, lawsuits and appeals. These skirmishes had appeared to reach a conclusion in March 2024 through a settlement in which Visa and Mastercard agreed to lower interchange, which determines the fees merchants pay for card transactions. 

The card networks agreed to reduce posted interchange fees by four basis points for at least three years, with a reduction of at least seven basis points below Dec. 31, 2023, levels for at least five years. But a federal judge in June notified Visa and Mastercard that the settlement would be rejected.

In explaining his decision, the judge suggested that the card networks could make larger concessions on interchange fees. The ruling was also critical of the “honor all cards” rule, in which the card networks require merchants that accept one product from a network to accept all card products from that network.

Visa and Mastercard expressed disappointment with the rejection of the U.S. settlement at the time, Members of the National Grocers Association and the Merchant Payments Coalition said the settlement would provide only temporary relief from fees.

“Visa and Mastercard have been trying to resolve the issue through settlements, but they keep getting thrown out by the courts, with the U.K. case being a notable exception,” Aaron McPherson, principal at AFM Consulting, told American Banker, noting the U.K. settlement was well below the plaintiffs’ claim. 

“It demonstrates the limitations of the court system in obtaining meaningful relief, since [$251 million] is easily affordable by Mastercard. Legislation is needed to substantially change the policies of the card networks,” McPherson said.

The politics of payment fees is unclear. While Donald Trump has expressed support for lower card fees, much of the pressure on card network practices has come from the Consumer Financial Protection Bureau, whose work has been severely curtailed by the Trump administration.

There are also structural differences between the U.S. and U.K. fee disputes, Aaron Press, research director of worldwide payment strategies at IDC, told American Banker.

“The attempts to create deals with the networks in the U.S. have centered around addressing merchant harm by limiting fees and interchange increases in the future, whereas the U.K. suit was aimed at consumer harm,” Press said. “And with the changes at CFPB, it seems unlikely that a similar U.S. action would take place.”