Visa / MC Interchange Litigation Update
Judge’s Questions Imply Preliminary Approval of Settlement Likely
April 29, 2026 — Judge Brian Cogan of the Eastern District of New York was, at last, on full public display—or for many of us following the case, full public dial-in—this past Monday, presiding over a hearing on whether to grant preliminary approval to the November 2025 proposed settlement of the equitable relief issues in the Visa / Mastercard interchange antitrust case.
In plain English, this is the case in which credit card-accepting merchants are seeking changes to Visa and MC rules that they say are anticompetitive, and therefore illegal, and that drive continuously higher interchange fees. Advocates of the settlement proposal maintain that merchants will see $38 billion in outright rate relief over 5 years, and more than $200 billion over 8 years as greater competition among networks and banks drives rates lower. Opponents argue that the rate relief offered is small relative to the hundreds of billions of dollars merchants will pay to accept credit cards over the same period, and, far from enhancing competition among networks and card issuers, the settlement would only perpetuate unrestrained pricing by a Visa/MC duopoly. For those eager for an end to the litigation, which dates to 2005, Monday’s hearing offered some cause for optimism, while those who feel the merchant community deserves a better deal might reasonably be discouraged by the judge’s comments.
By way of background, the most recent proposed settlement between Visa, MC, and several issuing banks on one side (the defendants), and the class of roughly 12 million merchants on the other side (the plaintiffs), follows an earlier proposal from March 2024, which failed to gain preliminary approval from then-presiding Judge Margo Brodie. Judge Brodie’s July 2024 decision relied heavily on the limited practical benefit of the proposal for many merchants—large ones especially—particularly given its reliance on expanded surcharging rights (which are restricted in several states) and the limited applicability of the average ~7 basis point rate reduction. She also expressed concern that the proposal did not go far enough in addressing the core structural issues in the case, including the networks’ Honor All Cards rules. At the same time, she emphasized the substantial risk the merchant class would face if the case proceeded to trial: while plaintiffs (including the DOJ and states) prevailed at trial in a 2016 case against American Express regarding merchant fees, that decision was later reversed on appeal, leaving merchants empty-handed.
The current proposal differs in important ways. While it also expands merchant surcharging rights, it relies heavily on a new framework distinguishing among three categories of credit cards: standard (minimal or no rewards), premium (rewards-driven), and commercial (including small business cards). Debit cards remain outside this framework and continue to be subject to existing no-surcharge rules. Under the proposal, merchants could treat these product categories differently at checkout, in contrast to the networks’ current Honor All Cards rules, which generally require uniform acceptance.
Under this framework, a merchant would have more opportunities to steer customers toward cards that the merchant prefers. A merchant could choose to accept some categories of cards (say, standard) and not others (commercial, perhaps). They could surcharge some categories and not others, without regard to prior “level playing field” rules that effectively required comparable treatment of American Express and Discover transactions. A merchant could also discount certain categories of cards (for example, offering 1% or 2% off the price if a customer uses a lower-cost card), and importantly, they could offer a discount for the cards of specific issuers—potentially reflecting negotiated arrangements with issuing banks. They could differentiate by network brand or by specific card products (for example, surcharging Visa Signature but not Mastercard World). A few key limits would remain, though: debit cards could not be surcharged, and issuer-specific differentiation would be permitted only through discounting, not surcharging.
At the same time, the networks would offer limited rate relief. Posted interchange rates would be capped at March 31, 2025 levels, and the average effective interchange rate would be reduced by 10 basis points. Both of these provisions would last for five years. Merchants with previously negotiated rates would receive a proportional reduction, intended to address a key concern in the prior proposal. In addition, rates on standard credit cards would be capped at 125 basis points for eight years—roughly 100 basis points below current averages—creating an incentive for merchants to steer customers toward lower-cost cards.
Given the breadth and complexity of these changes, it is not surprising that the proposal is difficult to evaluate and remains controversial. The structure of the litigation adds another layer of complexity. The settlement was negotiated by plaintiffs’ counsel—representing five named merchant plaintiffs but tasked with representing the broader class of approximately 12 million merchants—and the defendants. Inevitably, not all merchants support the result. Objectors, including several large merchant groups, have been given the opportunity to present arguments in opposition. The result is an unusual dynamic in which plaintiffs’ counsel and the networks jointly defend the proposal against other merchants seeking different or greater relief. The hearing thus effectively pits merchants against merchants, with the networks seeming to pile on against the Objectors.
How did Monday’s hearing unfold? Because this proposal differs materially from the 2024 version, the court’s focus has shifted. There appears to be less emphasis on whether different categories of merchants can benefit—this proposal is designed to address that concern—and more focus on litigation risk and on what relief might realistically be achieved at trial.
One early indication of the judge’s thinking came during argument by Mastercard’s counsel, William Michael, as he outlined perceived weaknesses in the Objectors’ position. Judge Cogan asked, if their case is so strong, why wouldn’t the networks prefer to go to trial? Listening to this exchange, one couldn’t help but wonder if this was the judge’s way of suggesting that the networks are in a stronger position than implied by the settlement.
Later, in questioning attorney Mary Miller (representing Circle K and others), the judge was skeptical about the practicality of eliminating default interchange rates altogether, as sought by the Objectors. “What’s the alternative that isn’t complete chaos?”, Judge Cogan asked. Ms. Miller responded that direct negotiations between merchants and issuers to establish rates is feasible given that the top 10 issuers account for 84% of card volume—meaning relatively few rate contracts would be required. But the question itself reflected concern about the practicality of that approach. The same concern resurfaced later when Ms. Miller suggested merchants might be better off going to trial—and even losing—than accepting the settlement. Judge Cogan responded, pointedly: “Be careful what you wish for.”
The clearest window into the judge’s thinking came in a later exchange with Walmart’s counsel, Jesse Panuccio, regarding the Objectors’ push to eliminate the Honor All Cards rule entirely. Judge Cogan observed that, if he were presiding over a trial, he might instead seek to “carve away” aspects of the rule rather than eliminate it wholesale—aiming to “make as little change as possible… rather than go at it with a meat cleaver.” He then asked why Objectors were confident that a trial remedy would go further than the current proposal, a line of questioning that suggests Judge Cogan views the settlement as broadly aligned with the type of incremental relief a court might ultimately impose.
There are, of course, other issues the court must consider. One recurring concern is whether the named plaintiffs and their counsel have adequately represented the class as a whole—a question that played a central role in the Second Circuit’s 2016 decision vacating a 2013 settlement. Objectors continue to argue that the five named plaintiffs, all relatively small businesses, cannot adequately represent the diverse interests of a nationwide merchant class, and that plaintiffs’ counsel did not sufficiently incorporate input from larger merchants during negotiations. Plaintiffs’ counsel disputes this characterization, arguing that many of the settlement’s core features reflect positions long advocated by merchant groups.
Finally, there is the continuing need for Judge Cogan to assess the value of the relief the settlement might provide to merchants relative to the risks of continued litigation. Plaintiffs’ expert Joseph Stiglitz has estimated that the rate relief could be worth roughly $38 billion over five years (based on certain assumptions). Objectors counter that $38 billion is modest relative to the hundreds of billions in interchange fees likely to be collected by Visa and MC over the same period—and that the settlement leaves core competitive issues unresolved. But the alternative—proceeding to trial with uncertain outcome—carries its own risks, which the court must evaluate in deciding whether to approve the deal.
Judge Cogan is expected to rule on preliminary approval in the coming weeks. If granted, the case would proceed through additional steps before any final approval, including notice to the class and further hearings. Any ultimate decision would also be subject to appeal, potentially extending the timeline by years.
The bottom line following Monday’s hearing: preliminary approval appears more likely than not, though meaningful uncertainty remains. Even if approved, the settlement is unlikely to mark the end of the road for this long-running litigation.
Stay tuned.
Lou Morsberger is the founder and CEO of Payments Strategy Consulting, LLC, based in Chevy Chase, Maryland, which advises merchants and trade associations on payments and card acceptance strategy. www.paystratcon.com