The proposed $30 billion antitrust settlement by Visa Inc. (NYSE:V) and Mastercard Inc. (NYSE:MA) is facing a potential setback as a New York judge has indicated that she may not approve the agreement.
What Happened: U.S. District Judge Margo Brodie, during a hearing on Thursday, signaled that she is likely to reject the proposed settlement, Reuters reported. The settlement, announced on Mar. 26, aimed to resolve the majority of claims in a nationwide litigation that began in 2005.
The settlement was designed to limit credit and debit card fees for merchants, with small businesses accounting for over 90% of the settling merchants. However, critics argue that the proposed settlement offers little or no benefit to merchants.
Visa and Mastercard expressed their disappointment at the judge’s stance. Mastercard described the settlement as a “fair resolution” that would provide businesses with more flexibility in managing card transactions. Meanwhile, Visa referred to it as an “appropriate resolution” to the nearly two-decade-old case.
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Objectors to the settlement, including the National Retail Federation, the world’s largest retailer trade group, have criticized it as “manifestly insufficient,” offering “meager and temporary” benefits.
Why It Matters: The proposed settlement comes amid increased scrutiny of Visa and Mastercard’s fee practices. In May, the two companies were under investigation in the UK for fee hikes without corresponding service improvements. This investigation was initiated by Britain’s Payment Systems Regulator, which expressed concerns about a lack of competition in the market.
However, Visa and Mastercard had reached a landmark antitrust class action settlement with U.S. merchants in March. This settlement, subject to approval by the U.S. District Court for the Eastern District of New York, aimed to resolve claims for injunctive relief in the “In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation.”
Following this settlement, Mastercard announced a fee increase in April, adding millions in costs for retailers. The network “assessment” fee was set to increase to 0.14% from 0.13%, resulting in an additional $259.1 million in fees based on the previous year’s transactions exceeding $2 trillion.
Despite these developments, analysts remained optimistic about Visa and Mastercard’s future. Piper Sandler initiated coverage in May and cited their strong positions in the global payments landscape and potential for sustained growth.
Price Action: Visa Inc closed at $271.19 on Thursday up 0.32% for the day, with after-hours trading reaching $271.50, up 0.11%. Year to date, Visa’s stock has gained 4.76%. Meanwhile, Mastercard Inc closed at $445.00 on the same day, with a 0.45% increase. Year to date, Mastercard’s stock has risen by 5.48%, according to the data from Benzinga Pro.
Image Via Shuttesrtock
This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
