Asking for Strike 3
The credit card giants have tried multiple times to pull a fast one on Main Street by negotiating antitrust litigation settlements that allow them to continue their anticompetitive practices with legal immunity. According to the Wall Street Journal, they are at it again.
Courts have already rejected those efforts twice — emphatically.
- First, in 2016, the U.S. 2nd Circuit Court of Appeals overturned an attempted settlement that would have permanently endorsed credit card industry bad practices, finding that the settlement showed lawyers representing the plaintiffs had been ineffective and were, essentially, trying to take money rather than reforming credit card practices.
- Second, in 2024, U.S. District Judge Margo Brodie rejected a proposed settlement at the preliminary stage because it did not deal with the way Visa and Mastercard fix swipe fees or the cartel structure Visa and Mastercard have set up for the banks issuing their cards.
Now, the credit card giants are trying for the third time to finagle a settlement that gives them legal protection to continue their bad practices without real changes. The proposed settlement:
- Leaves Visa and Mastercard free to jack up their own network fees without any market limits while making a show of tiny, temporary reductions in the banks’ fees.
- All of the supposed “savings” in the agreement could be cancelled out by Visa/Mastercard increasing their own fees on merchants.
- All of the supposed “savings” in the agreement could be cancelled out by Visa/Mastercard increasing their own fees on merchants.
- Lets Visa and Mastercard keep price-fixing banks’ swipe fees, which insulates those fees from normal market competition and keeps fees excessively high.
- Tells merchants how to run their businesses by making them accept all rewards cards — or none of them — and letting Visa/Mastercard manipulate which cards are and are not rewards cards.
- This makes a mockery of Judge Brodie’s admonition that any credible settlement must deal with credit card companies tying all their cards together as one.
- It creates a bucket of 85% of all credit cards that remain tied together as one — and allows Visa/Mastercard to turn that bucket into 100% of all credit cards if they choose to do so.
- It keeps in place the Visa/Mastercard prohibitions against banks competing with each other, which is the central problem plaguing this market.
In short, under this third proposed settlement, all of the major antitrust violations at issue in the case — with claims that have already survived summary judgment — are swept aside without any real reform.
With two strikes against them in their efforts to get legal immunity without making real changes, the credit card companies have decided to ask for Strike 3. This bad settlement should be rejected by the court just like the last two bad settlements.
The one thing that three straight bad settlements proves is that Congress needs to act. Litigation settlements negotiated by Visa, Mastercard and plaintiffs’ lawyers who want their payday simply can’t deal with this problem.
COMPETITION IS BETTER FOR EVERYONE
IT'S TIME TO PASS THE CREDIT CARD COMPETITION ACT