Antitrust Law Daily Wrap Up, ANTITRUST—E.D.N.Y.: Visa, Mastercard win preliminary approval of revised merchant interchange-fee settlement, (Jun 10, 2026)

By Martin A. Steinberg, J.D.

The amended settlement provides broader merchant relief than an earlier rejected proposal, including repeal of the Honor All Cards rule, expanded surcharging relief, and interchange-rate reductions.

The federal district court in Brooklyn, New York granted preliminary approval of an amended equitable-relief settlement in the long-running payment card interchange fee and merchant discount antitrust litigation against Visa and Mastercard. The court concluded that the revised settlement, reached after an earlier proposal was rejected, likely satisfies Rule 23(e) because it provides more extensive merchant relief, including effective repeal of the Honor All Cards rule, expanded ability to surcharge by brand or product and to discount by issuer, brand, or product, changes to digital-wallet and all-outlets rules, a 10-basis-point reduction in the combined average effective interchange rate, and a cap on standard consumer credit-card interchange rates. Although merchant objectors argued that the settlement still fails to eliminate key restraints, including the Honor All Issuers and No-Bypass rules, the court found that the amended settlement represents a reasonable recovery in light of the risks, costs, and delay of continued antitrust litigation (In Re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, No. 1:05-md-01720-BMC-JAM (E.D.N.Y. Jun. 9, 2026)).

Background. The litigation began in 2005, when multiple antitrust complaints against Visa, Mastercard, and issuing banks were consolidated in the Eastern District of New York. The consolidated class complaint defined two subclasses, one seeking damages and one seeking equitable relief, and, after the Second Circuit reversed approval of an earlier settlement, the court appointed separate counsel for the damages and equitable-relief classes. A 2012 settlement was preliminarily approved and later finally approved, but the Second Circuit reversed, finding that the damages and equitable-relief classes had conflicting interests because the damages class sought maximum cash compensation while the equitable-relief class sought stronger prospective restraints on network rules.

The equitable-relief plaintiffs filed their complaint in 2017 on behalf of more than 12 million merchants, challenging Visa and Mastercard rules, including Honor All Cards, Honor All Issuers, All Outlets, No Discounting, No Surcharging, Anti-Discrimination, and No-Bypass rules, along with default interchange fees. The court certified the equitable-relief class under Rule 23(b)(2) in 2021, later resolved Daubert and summary judgment motions, and left standing several claims, including plaintiffs’ two-sided market claims under Amex. The parties then reached a first equitable-relief settlement in 2024, but the court denied preliminary approval because the proposed relief was inadequate, particularly given the absence of Honor All Cards relief and the limited surcharging and interchange-rate reforms.

Amended settlement. After the court denied preliminary approval of the first settlement, the parties resumed negotiations with a new mediator and later sought preliminary approval of an amended settlement. The court found that the amended settlement provides broader relief than the rejected proposal. Most notably, while the first settlement offered no relief from the Honor All Cards rule, the amended settlement would effectively repeal that rule by allowing merchants to accept standard Visa or Mastercard cards while rejecting higher-cost premium cards, and to accept consumer cards while rejecting higher-cost commercial cards. The amended settlement also removes a carveout from the digital-wallet relief that would have favored hypothetical Visa or Mastercard wallets. However, it still provides no relief from the Honor All Issuers rule.

The amended settlement also expands other forms of merchant relief. It would allow merchants to run longer pilot programs to test rejecting, surcharging, or discounting certain cards; clarify that discounting by issuer, brand, and product is permitted; and allow merchants to surcharge Visa and Mastercard cards up to the lesser of their full cost of acceptance or 3% of the transaction, regardless of whether they accept or surcharge comparator cards such as American Express or Discover. It also preserves provisions allowing merchant buying groups to collectively negotiate rates and services.

The amended settlement would impose systemwide credit-card interchange limits for five years, including a 10-basis-point reduction to the combined average effective interchange rate, compared with 7 basis points in the prior settlement. It would also extend rate relief to large merchants with negotiated interchange rates and cap posted interchange rates on standard consumer credit cards at 125 basis points for at least eight years. In addition, the amended settlement establishes a $21 million merchant education program, $6 million more than the earlier proposal.

The objectors challenged the settlement on several grounds. Many argued that the absence of Honor All Issuers relief is a serious defect because merchants still cannot reject cards issued by particular banks. Others argued that the repeal of Honor All Cards is of limited practical value because large merchants cannot realistically refuse premium cards without alienating customers. Objectors also criticized the surcharging and discounting relief as commercially impractical or limited by state law, argued that the 10-basis-point rate reduction is too small, warned that Visa and Mastercard could offset interchange reductions through other fees or rate structures, and objected to the continued existence of the No-Bypass rules, which prevent merchants from settling transactions directly with issuers.

Adequacy of representation. The court found that the class representatives and class counsel adequately represented the equitable-relief class. It relied on its earlier conclusion, when reviewing the first proposed settlement, that the representatives and counsel were adequate, and found no changed circumstances warranting a different result.

The court rejected objectors’ arguments that the small-merchant class representatives had traded away the interests of large national merchants, or that class counsel had compromised trial prospects for a fee award. According to the court, those objections concerned the adequacy of the settlement relief rather than any conflict or defect in representation. Because all class members shared a common interest in eliminating Visa and Mastercard rules that allegedly maintained supracompetitive interchange fees, and because there was no evidence of procedural unfairness in the negotiations, the court held that the adequacy-of-representation factor favored preliminary approval.

Arm’s length negotiations. The court found that the amended settlement was negotiated at arm’s length. After the first settlement was rejected, the parties resumed negotiations with the assistance of retired Magistrate Judge James Orenstein, who had extensive familiarity with the case from his years on the bench. The court credited the mediator’s description of a lengthy and adversarial process involving exchanges of financial data and expert analyses, multiple in-person and virtual mediation sessions, and more than 30 separate ex parte calls or Zoom sessions. The court also noted that attorneys’ fees and class representative service awards were not discussed until after the parties had reached an agreement on class-wide relief. Finding no indication that the amended settlement resulted from anything other than hard-fought, arm’s-length negotiations, the court held that this factor favored preliminary approval.

Adequate relief for the class. Finally, the court analyzed whether the amended settlement provides adequate relief to the merchant class under Rule 23(e) and the overlapping factors in City of Detroit v. Grinnell Corp., 495 F.2d 448, 463 (2d Cir. 1974). On balance, the court found that the factors weighed in favor of preliminary approval and suggested that it would likely be able to grant final approval.

The court found that continued litigation would be complex, expensive, and lengthy, particularly because antitrust class actions are difficult, and this case would still require a substantial trial. Although plaintiffs had survived significant Daubert and summary judgment motions, the court emphasized that liability was not assured. Plaintiffs would still have to prove under the rule of reason, and in light of Amex, that the challenged Visa and Mastercard rules harmed competition in the two-sided payments market and that any procompetitive benefits could be achieved through less restrictive means. The court treated the risk of maintaining the class through trial as neutral because defendants had not indicated they would seek decertification. The court also found the settlement reasonable in light of litigation risks, noting that some objectors’ criticisms had merit, but that plaintiffs might obtain less or no relief after trial and on appeal. The court emphasized that the amended settlement improves on the rejected first settlement by repealing the Honor All Cards rule, improving digital-wallet relief, and providing rate reductions that a court likely could not impose after trial.

Because the settlement provides equitable relief rather than a monetary fund, no distribution mechanism is required. The court treated this factor as neutral.

The settlement allows Visa and Mastercard to pay approved attorney fees and expenses up to $206 million, with Visa paying up to two-thirds and Mastercard up to one-third. Because the fees would be paid separately by defendants, not from a class recovery, and were negotiated only after agreement on substantive relief, the court found no material conflict with the class.

The settlement releases equitable-relief claims relating to conduct that was or could have been alleged in the case. The court found the release acceptable and declined to decide whether it would bar a separate debit-card lawsuit, leaving that issue to the court presiding over that case.

The court found that the settlement treats class members equitably, though not identically. Unlike the first settlement, the amended settlement gives merchants with negotiated interchange rates a pro rata reduction and improves surcharging relief. The court also found that the repeal of the Honor All Cards rule is meaningful relief available to all merchants, even if some may choose not to use it.

The court found this factor weighed against approval, but not decisively, because Visa and Mastercard could likely withstand greater rate relief, though more structural changes could threaten their operating models. Balancing all factors, the court granted preliminary approval.

The Case is No. 1:05-md-01720-BMC-JAM.

Judge: Cogan, B.

Attorneys: Phillip F. Cramer (Sherrard & Roe PLC) for QVC, Inc. Abby Faith Rudzin (O'Melveny & Myers LLP) for Capital One Bank.

Companies: Capital One Bank; HSBC Bank USA, N.A.; Wells Fargo & Co.

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