Visa and Mastercard win preliminary approval for $38B settlement

A federal judge in Brooklyn granted preliminary approval Tuesday to Visa and Mastercard's $38 billion settlement with US merchants, clearing a major legal hurdle in a 21-year antitrust battle over credit card swipe fees that has become one of the longest-running commercial lawsuits in American history.

"The settlement is fair, reasonable, and adequate," US District Judge Brian Cogan said in his ruling, according to court documents. Cogan's approval marks a significant improvement over a $30 billion proposal rejected in June 2024 by Judge Margo Brodie, who called the projected merchant savings "paltry."

Under the revised terms, interchange fees — the charges merchants pay each time a customer swipes a Visa or Mastercard — will decline by roughly 0.1 percentage points annually over five years. The settlement also modifies the "honor all cards" rule, which previously forced merchants to accept every card a payment network issued regardless of processing costs. Merchants will now have more flexibility to steer customers toward cheaper payment options, a concession retailers have sought since the original complaint was filed in 2005.

The deal, first announced in November 2025, resolves allegations that Visa and Mastercard collusively set interchange fees while enforcing anti-competitive rules that blocked merchants from seeking alternatives. Not all industry participants are satisfied. The National Retail Federation, one of the largest merchant trade groups, has publicly opposed the revised terms, arguing that even $38 billion does not address the underlying duopoly that controls the vast majority of US card-based payment processing. Cogan's preliminary approval is a procedural checkpoint — the court will now notify class members, solicit objections, and hold a fairness hearing before deciding on final approval.

For Visa and Mastercard, the preliminary approval removes a legal overhang that has weighed on the stocks for years. Visa trades at roughly 28 times forward earnings, while Mastercard trades at about 32 times, according to data compiled by Bloomberg. The settlement's impact on their take rates — the percentage of each transaction they retain as revenue — will depend on how quickly merchants exercise their new steering rights and whether the fee reductions pressure the networks' high-margin business models. American Express, which operates a closed-loop network and sets its own fees, could emerge as a relative beneficiary if merchants steer customers away from Visa and Mastercard toward Amex's premium cardholders.

The fairness hearing is expected later this year. If Cogan grants final approval, the settlement would bind millions of US merchants who accept Visa and Mastercard, though objectors including the NRF retain the right to appeal.

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