The Merchant Payments Coalition, backed by 978 retailers and retail trade associations, is asking a federal judge to block the proposed $38 billion settlement of a 2005 class-action lawsuit over credit card interchange fees.

The U.S. District Court in the Eastern District of New York gave preliminary approval to the deal in June, and payments to retailers had been expected to begin this month. The MPC filed a letter with the court last week objecting to the settlement, arguing it was reached without substantial retail input and does not provide adequate relief.

Visa and Mastercard stand accused of violating antitrust law by centrally fixing the interchange fees their banking partners charge retailers for accepting consumer card payments.

"We object to this proposed settlement because it would grant Visa, Mastercard and giant card-issuing banks sweeping liability immunity for their anticompetitive system of card fees and rules while providing merchants with temporary and meager relief that is riddled with loopholes that will make the relief largely ineffective," the businesses and associations said in the filing.

Retailers voiced opposition to the proposal last year, before it gained preliminary approval. Mastercard defended the deal.

"We are pleased the court granted preliminary approval and look forward to securing final closure of this matter," a Mastercard spokesperson told Supermarket News. "We believe that this settlement agreement delivers on the expectations of the court and balances the interests of all parties involved."

A spokesperson for Visa could not be reached for comment.

Two Prior Settlements Rejected

Courts have already rejected two settlement offers from the card companies. The 2nd U.S. Circuit Court of Appeals overturned the first in 2016 after merchants said it would not curb the card companies' pricing practices. A federal judge rejected a second proposed settlement in 2024, calling it similar to the current offer, according to the MPC. In that ruling, the judge said the deal did not adequately address the price-setting structure and voiced concern that Visa and Mastercard's "honor all cards" rule forces merchants to accept all cards from all banks regardless of the swipe fee rates charged.

The latest proposal would let retailers reject "premium" cards—those with rewards programs—but the MPC said that change would have little impact because premium cards account for 90% of credit card spending. The settlement would also lower swipe fees by only a tenth of a percentage point, which the MPC called a small fraction of the 2.36% average rate merchants paid in 2025.

"The proposed settlement is a subterfuge for approving the bad practices of the credit card industry, and the large number and wide range of merchants of all categories and sizes signing this letter show it," said Doug Kantor, a member of the MPC executive committee.

Another provision would allow merchants to add a surcharge of up to 3% on credit card purchases. The MPC said this would anger consumers and prove too complicated for retailers to implement because of state laws and card network rules.

Swipe fees keep climbing. Credit and debit card interchange fees have risen 80% since the pandemic and reached a record $198.25 billion last year, according to the MPC. They rank as the second-highest operating cost for many merchants, behind only labor.

Congress Weighs Network Competition

Congress, meanwhile, is considering the Credit Card Competition Act, which would require large banks to enable the cards they issue to be processed through at least two unaffiliated networks—Visa or Mastercard plus a competitor such as NYCE, Star or Shazam. The measure, which retail trade groups support, would create more competition and save consumers $17 billion a year, the MPC said.

The MPC represents retailers, supermarkets, convenience stores, gasoline stations, online merchants and others. With the court yet to rule on the objections, the fate of the $38 billion deal—and the pricing power it would shield—now rests with a judge who has already rejected two predecessors.