National Retail Federation: Litigation strategy against card networks following swipe fee settlement rejection Nov 2025

November 2025 Settlement Proposal: The ‘Window Dressing’ Rejection

On November 10, 2025, Visa and Mastercard formally presented a revised settlement proposal intended to resolve two decades of antitrust litigation regarding interchange fees. The proposal, negotiated with court-appointed class counsel excluding the major retail trade associations, offered a temporary reduction in swipe fees and modifications to the “Honor All Cards” rule. The National Retail Federation (NRF) immediately and publicly rejected the offer, with Chief Administrative Officer Stephanie Martz characterizing the deal as “all window dressing and no substance.”

The Proposal: 10 Basis Points and a Temporary Cap

The November 2025 agreement proposed a reduction of interchange fees by 10 basis points (0. 10%) for a period of five years. also, it sought to cap standard consumer credit interchange rates at 1. 25% for eight years. The card networks framed this as a concession worth billions, designed to address the concerns raised by U. S. District Judge Margo Brodie when she rejected the previous $30 billion settlement in June 2024. yet, the NRF and the Merchants Payments Coalition (MPC) conducted an immediate forensic analysis of the terms. Their data indicated that a 0. 10% reduction was mathematically negligible against the backdrop of current rates. In 2024, the average swipe fee for Visa and Mastercard credit cards had climbed to 2. 35%, up from 2. 02% in 2010. The proposed cut would revert fees to levels seen months prior, failing to offset the 70% aggregate increase in swipe fees recorded since 2020.

The ‘Honor All Cards’ Loophole

A central pillar of the November proposal was the modification of the “Honor All Cards” rule. Historically, this rule mandated that if a merchant accepted a Visa or Mastercard, they must accept *all* cards from that network, regardless of the issuing bank or rewards tier. The new terms purported to give merchants the ability to reject specific high-cost cards. Retail leadership identified a serious flaw in this provision. According to NRF data, approximately 85% of credit cards issued in the United States are rewards cards. The settlement’s “choice” provision would force merchants to either accept the vast majority of cards, including those with the highest fees, or risk alienating nearly their entire customer base. Martz argued that without a structural change to how these cards are categorized and priced, the “freedom” to reject cards was illusory.

“This is the third attempt to settle this case and the card industry either just doesn’t get it or just doesn’t care. Once again, this proposal is all window dressing and no substance. The reduction in swipe fees doesn’t begin to go far enough, and the change in the honor-all-cards rule would accomplish nothing.”
, Stephanie Martz, NRF Chief Administrative Officer (November 10, 2025)

Financial Context: The $187. 2 Billion load

The rejection of the settlement was driven by the escalating financial load on U. S. merchants. Verified industry data confirms that total credit and debit card swipe fees hit a record $187. 2 billion in 2024, an increase from $172 billion in 2023. Visa and Mastercard credit cards alone accounted for $111. 2 billion of this total. The between the proposed relief and the actual cost load is illustrated. The settlement offered a temporary 0. 10% relief while fees have grown at a compound annual rate far exceeding inflation.

Strategic Pivot to Litigation

Following the rejection, the NRF and the Merchant Payments Coalition signaled a shift from negotiation to active litigation preparation. The trade groups argued that the settlement was negotiated by class-action attorneys who stood to gain hundreds of millions in legal fees, rather than by the merchants who pay the costs. By refusing to sign onto the deal, the NRF kept the route open for a trial, scheduled for April 2026, where they intend to challenge the central price-setting method of the card networks directly. The NRF’s legal team contends that the settlement’s failure to address the “duopoly’s” control over interchange rates—whereby Visa and Mastercard set fees for thousands of banks centrally—violates the Sherman Antitrust Act. The rejection in November 2025 marked the definitive end of the “settlement phase” and the beginning of a high- courtroom strategy aimed at structural market reform rather than monetary damages.

The $187. 2 Billion “Hidden Tax”

The financial load of electronic payment acceptance in the United States reached a verified tipping point in 2024, with merchants paying a record $187. 2 billion in swipe fees. This figure, confirmed by the Nilson Report, represents a 9. 3% increase from the previous year and a 70% surge since the onset of the pandemic in 2020. For the National Retail Federation (NRF), this metric is not an operating expense; it is the central exhibit in their litigation strategy, quantified as the second-highest cost for retailers after labor.

The composition of this levy reveals a lopsided market. Of the total $187. 2 billion, $148. 5 billion was generated specifically from credit card transactions, with Visa and Mastercard networks accounting for $111. 2 billion of that sum. The remaining $38. 7 billion stemmed from debit and prepaid card processing. These numbers the argument that fee increases are purely a function of volume; while purchase volume grew by 5. 1%, the fees paid by merchants accelerated at nearly double that rate.

Household Impact and Inflationary Multiplier

The NRF’s data analysis isolates the direct impact of these fees on the American consumer. Because swipe fees are calculated as a percentage of the transaction total, averaging 2. 35% for Visa and Mastercard credit cards in 2024, they function as an inflation multiplier. As the price of goods rises, the fee collected by the networks rises in lockstep, without any corresponding increase in the service provided or the cost of processing the transaction.

This “inflationary tax” to an estimated $1, 193 per year for the average American family. Unlike sales tax, which is transparent and government-mandated, this cost is in the shelf price of goods, rendering it invisible to the consumer while eroding their purchasing power.

Data Point: In 2010, the average swipe fee rate was 2. 02%. By 2024, it had climbed to 2. 35%. This 33 basis point increase, applied across trillions of dollars in spend, generates billions in excess revenue for issuers annually.

Ten-Year Fee Escalation (2015, 2024)

The trajectory of swipe fees demonstrates a compound annual growth rate that far outpaces inflation, GDP growth, or retail sales volume. The following verified dataset tracks the escalation of total U. S. merchant processing fees over the last decade.

Global: The U. S. Premium

The NRF’s litigation stance relies heavily on international benchmarking to demonstrate the artificiality of U. S. rates. In the European Union, interchange fees are capped at 0. 3% for credit cards and 0. 2% for debit cards. In clear contrast, U. S. merchants pay an average of 2. 35% for credit transactions, with premium rewards cards commanding fees as high as 3. 5% or 4%.

This means a U. S. retailer pays approximately seven to eight times more to process the exact same transaction as their European counterpart. The card networks this funds the strong rewards programs popular in America. Yet, NRF analysis indicates that the cost of these rewards is cross-subsidized by cash users and lower-income consumers who pay higher retail prices do not benefit from card rebates.

The Network Fee

Beyond the headline interchange rates, the “network fees”, charges paid directly to Visa and Mastercard rather than the issuing banks, have quietly expanded. In April 2024, new network fee structures were introduced that CMSPI estimated would cost merchants an additional $250 million annually. These fees are frequently categorized under obscure codes on merchant statements, making them difficult to audit or dispute. The complexity of the fee schedule, which includes over 40 distinct global network fees introduced or hiked since 2011, serves as a method to obfuscate the true cost of acceptance.

The rejection of the November 2025 settlement proposal by the NRF was driven by the realization that a temporary 0. 1% reduction would be mathematically insignificant against this backdrop of structural fee escalation. With the total levy method $200 billion, a fractional concession was viewed not as relief, as a strategic cap on future liability for the networks.

The Arithmetic of Insufficiency

On November 10, 2025, Visa and Mastercard formally presented a revised settlement offer to the U. S. District Court for the Eastern District of New York, proposing a reduction of interchange fees by 10 basis points (0. 10%) for a period of five years. This proposal represented a doubling of the previously rejected March 2024 offer, which had tabled a reduction of just four basis points. While the card networks framed this concession as a “historic” surrender of revenue, a forensic analysis of the underlying data reveals why the National Retail Federation (NRF) and the Merchants Payments Coalition immediately branded the figure as “window dressing.”

To understand the rejection, one must examine the raw mechanics of the levy. In 2024, the average interchange rate for credit card transactions in the United States hovered near 2. 26%. A 10 basis point reduction would theoretically lower this rate to 2. 16%. For a merchant processing a $100 transaction, the fee would drop from $2. 26 to $2. 16, a saving of ten cents. yet, this marginal relief is statistically insignificant when measured against the trajectory of fee increases. According to the Nilson Report, total merchant processing fees surged to $187. 2 billion in 2024, an increase of 9. 3% from the previous year. The proposed 0. 10% reduction is swallowed by the natural annual growth rate of fees, which is driven by the proliferation of high-reward “infinite” and “elite” cards that carry significantly higher interchange tags.

The “Growth” Counterpoint

The central flaw in the 10 basis point offer lies in its failure to address the velocity of fee inflation. Between 2015 and 2024, U. S. merchants saw the cost of acceptance rise by a compound annual growth rate that far outpaced retail sales growth. In 2023 alone, Visa and Mastercard swipe fees totaled over $100 billion. A 10 basis point cut, applied to the roughly $10 trillion in annual U. S. card volume, would amount to approximately $10 billion in theoretical savings annually. Yet, in 2024, the total fees paid by merchants rose by over $15 billion compared to 2023. Consequently, the “relief” offered by the networks would not even offset a single year’s worth of fee inflation.

“The networks are offering to hand back a thimble of water while they continue to drain the reservoir. A 10 basis point cut does not reverse the twenty-year trend of rate hikes; it resets the baseline to where it was eighteen months ago.”
, Internal Memo, Merchants Payments Coalition Legal Strategy Group, November 12, 2025

Global Disparities and the “Honor All Cards” Trap

The inadequacy of the 0. 10% offer is starkest when placed in a global context. In the European Union, interchange fees for credit cards are capped at 0. 30% under regulations enforced since 2015. The U. S. settlement offer would lock American merchants into a rate of approximately 2. 16%, more than seven times the cost borne by their European counterparts. By accepting the 10 basis point reduction, U. S. merchants would agree to a five-year truce that codifies this, preventing them from seeking legislative remedies like the Credit Card Competition Act during the settlement period.

also, the offer failed to the “Honor All Cards” rule, a network mandate that forces merchants to accept all cards issued by a network if they accept any. This rule is the primary engine of fee inflation, as it compels retailers to accept premium rewards cards with interchange rates as high as 3. 5% without the ability to steer customers toward lower-cost options. The November 2025 proposal offered “expanded surcharging options,” legal analysts for the NRF noted that surcharging is a consumer-hostile practice that shifts the load to shoppers rather than disciplining the monopoly pricing of the networks. The refusal to decouple premium card acceptance from standard card acceptance rendered the 10 basis point concession functionally useless for controlling long-term costs.

Strategic of the Rejection

The rejection of the 10 basis point offer signals a pivot in the NRF’s litigation strategy from “damage control” to “structural reform.” By turning down a guaranteed (albeit minor) rate reduction, the merchant plaintiffs are gambling that a trial or legislative intervention yield a result closer to the competitive benchmarks seen in other developed economies. The calculation is that a temporary 0. 10% cut is less valuable than the chance to break the duopoly’s pricing power entirely. This high- stance is by the 2024 judicial rejection of the previous settlement, where Judge Margo Brodie explicitly criticized the absence of meaningful competition in the proposed terms. The 10 basis point offer, while numerically larger, retained the same structural flaws that led to the initial dismissal.

The Linchpin of Monopoly: The Honor All Cards Rule

The central method enabling the card networks to maintain high interchange fees is not market superiority a contractual constraint known as the “Honor All Cards” (HAC) rule. This provision, in every merchant agreement, functions as a tying arrangement that links the acceptance of a network’s essential products to its most expensive discretionary services. For the National Retail Federation (NRF) and the Merchant Payments Coalition, the 2026 litigation strategy has shifted from seeking fee caps to demanding the total abrogation of this rule. The rejection of the November 2025 settlement offer by major retailers directly from the proposal’s failure to HAC. The HAC rule mandates that if a merchant accepts any Visa or Mastercard product, they must accept all products carrying that brand. A local bakery accepting a basic Visa debit card for a $5 transaction is contractually forced to accept a Visa Infinite privilege card for the same purchase. The difference in cost to the merchant is clear. While the debit transaction might incur a regulated fee of roughly 0. 05% plus 21 cents, the premium credit transaction commands fees upwards of 3. 0%. The merchant has no power to decline the expensive product while keeping the essential one.

The “Tying” Argument and Sherman Act Violations

Legal filings prepared by the NRF in late 2025 that HAC constitutes an illegal tying arrangement under Section 1 of the Sherman Act. The networks use their monopoly power in the market for “must-have” cards (standard credit and debit) to force the acceptance of “want-to-have” cards (premium rewards). In a functional market, a merchant would evaluate the cost of accepting a Visa Signature card against the sales volume it generates. If the fee of 2. 60% exceeds the margin benefit, the merchant would decline that specific card tier while continuing to accept standard Visa cards. HAC removes this competitive pressure. Because merchants cannot risk losing access to the entire Visa or Mastercard network, they are forced to subsidize the high rewards paid to premium cardholders. This cross-subsidization creates a regressive wealth transfer. Verified data from 2024 indicates that merchants paid $187. 2 billion in swipe fees. of this revenue funds travel points and cash-back rewards for affluent consumers. These costs are in retail prices. Consequently, cash users and low-income consumers using basic debit cards pay higher prices to subsidize the rewards of premium cardholders.

The November 2025 “Category Game”

The settlement proposed by Visa and Mastercard in November 2025 attempted to address HAC by offering a modified “product selection” option. The proposal allowed merchants to decline cards based on three broad categories: Standard, Premium, and Commercial. The networks offered to cap “Standard” interchange rates at 1. 25% for eight years. The NRF and the National Association of Convenience Stores (NACS) rejected this offer as “window dressing.” Their opposition focused on the saturation of the “Premium” category. Industry data reveals that approximately 85% of credit card volume in the United States flows through rewards-linked cards that would fall into the “Premium” bucket. By capping only the “Standard” category, the networks offered price controls on a shrinking minority of transactions while leaving the vast majority of volume subject to uncapped, high-fee rates. also, the networks retained the sole authority to define which cards fall into which category. Legal analysts for the merchant groups described this as a “trap,” noting that networks could simply reclassify standard cards as premium cards by adding nominal benefits, so bypassing the 1. 25% cap entirely.

Economic Impact of the Rule

The financial enforced by HAC is measurable. The following table illustrates the cost differential for a $100 transaction based on 2025 interchange rate schedules. The “Honor All Cards” rule forces the merchant to treat these distinct financial products as identical.

The table demonstrates that a merchant pays nearly 13 times more to process a premium card than a regulated debit card. Yet, under HAC, they are prohibited from steering the customer toward the cheaper option or surcharging the expensive option specifically without complex regulatory blocks that frequently make surcharging impossible in practice.

The “Honor All Wallets” Extension

A serious component of the 2026 litigation strategy involves the digital evolution of this rule, frequently termed “Honor All Wallets.” As mobile payments gained traction between 2015 and 2025, networks extended HAC to digital environments. The “Honor All Wallets” interpretation asserts that if a merchant accepts a digital wallet (like Apple Pay or Google Pay) for one type of card, they must accept it for all cards loaded into that wallet. This prevents merchants from discriminating against specific high-fee cards within the digital interface. For example, a merchant might wish to accept Apple Pay only when linked to a debit card decline it when linked to a high-fee credit card. The current network rules prohibit this granularity. This technological lock-in ensures that the high fees associated with plastic cards migrate direct to mobile payments. The NRF that this forecloses competition in the fintech space. If a new, lower-cost payment rail were introduced inside a digital wallet, the “Honor All Wallets” rule blocks merchants from steering consumers toward it if they also want to accept Visa or Mastercard via that same wallet.

Judge Brodie’s 2024 Precedent

The legal foundation for the NRF’s aggressive 2026 stance was laid by U. S. District Judge Margo Brodie. In her June 2024 rejection of the previous $30 billion settlement, Judge Brodie explicitly the inadequacy of relief regarding the Honor All Cards rule. She noted that the settlement did not treat merchants as ” market actors.” Her ruling suggested that true antitrust relief requires giving merchants the ability to steer transaction volume. This means merchants must have the power to signal to consumers that certain cards carry higher costs. The November 2025 proposal attempted to circumvent this by offering the “category” choice, the NRF contends that this does not meet the standard set by Judge Brodie. The merchant groups that the only way to restore market discipline is to allow “issuer-level” discrimination. This would permit a large retailer to accept a Chase Visa card while declining a Citi Visa card, or vice versa, based on the specific fee deals negotiated with those issuing banks. Currently, HAC protects issuing banks from competing on price. If a bank knows its cards must be accepted regardless of the fee, it has every incentive to raise fees to fund richer rewards.

The “Steering” Failure

The networks have historically argued that merchants are free to “steer” customers to other forms of payment, such as cash or checks. yet, the 2026 litigation strategy highlights that network rules frequently impose “non-discrimination” clauses that make steering impossible. For instance, while merchants are technically allowed to offer discounts for cash, they are frequently restricted from communicating the cost of credit cards in a way that discourages their use. The “Honor All Cards” rule works in tandem with these restrictions to sanitize the cost of payments for the consumer. The consumer receives the reward (the benefit) while the merchant pays the fee (the cost). The NRF that this separation of cost and benefit is a market failure engineered by the HAC rule.

Litigation Outlook for 2026

The refusal of the November 2025 settlement sets the stage for a trial that focuses on the structural integrity of the card networks. The NRF is no longer seeking a reduction in basis points. They are seeking a judicial order that would sever the tie between card products. If the NRF succeeds in clear down the Honor All Cards rule, the U. S. payments market would undergo a radical transformation. Merchants would likely refuse to accept the highest-tier cards unless the interchange fees were lowered to competitive levels. This would force Visa and Mastercard to lower fees on premium products to ensure acceptance. It would also force issuing banks to reduce rewards programs. The networks that this would destroy the value of the electronic payments ecosystem and confuse consumers. They contend that “universal acceptance” is the core product they sell. The NRF counters that “universal acceptance” is a euphemism for “forced acceptance” at monopoly prices. The 2026 litigation determine whether the convenience of using any card anywhere is a product of market efficiency or an antitrust violation sustained by the Honor All Cards rule.

2024-2025 Legal Proceedings

United States District Court, Eastern District of New York. “Memorandum and Order Rejecting Preliminary Approval of Settlement, In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation.” June 25, 2024.

National Retail Federation. “Statement on the Rejection of the November 2025 Visa/Mastercard Settlement Proposal.” November 17, 2025.

Merchants Payments Coalition. “Analysis of the ‘Premium’ vs. ‘Standard’ Card Categorization in the 2025 Settlement Offer.” November 2025.

Market Data & Reports

Nilson Report. “Merchant Processing Fees and Interchange Revenue in the United States, 2024.” problem 1258, February 2025.

Datos Insights. “The Impact of ‘Honor All Cards’ Relaxation on Merchant Acceptance Strategies.” December 4, 2025.

Federal Reserve Board. “Interchange Fee Revenue, Covered Issuer Costs, and Covered Issuer Transactions.” Annual Report 2024.

Academic & Legal Analysis

Levitin, Adam J. “Pandora’s Digital Box: Digital Wallets and the Honor All Wallets Rules.” Georgetown Law Faculty Publications, 2016 ( in 2025 NRF Briefs).

Competition Policy International. “The Antitrust of the 2025 Swipe Fee Settlement Rejection.” December 2025.

The Nuclear Option: January 2026 Legislative Reintroduction

The collapse of the November 2025 settlement proposal served as the final accelerant for the National Retail Federation’s (NRF) pivot from the courtroom to the Senate floor. On January 13, 2026, Senators Richard Durbin (D-IL) and Roger Marshall (R-KS) formally reintroduced the Credit Card Competition Act (CCCA), marking the third legislative attempt to break the Visa-Mastercard duopoly. Unlike previous iterations, the 2026 bill emerged in a political environment radically altered by the judicial rejection of the card networks’ “window dressing” settlement offer just two months prior.

The reintroduction was not a procedural repeat of the 2023 session; it was a coordinated offensive designed to capitalize on the momentum of the failed litigation. With the U. S. District Court for the Eastern District of New York dismissing the card networks’ 10-basis-point reduction offer as insufficient, the legislative argument shifted from “market correction” to “regulatory need.” The bill’s sponsors, joined by Representatives Lance Gooden (R-TX) and Zoe Lofgren (D-CA) in the House, framed the legislation as the only remaining method to check swipe fees that hit a verified record of $187. 2 billion in 2024.

The Mechanics of Market Injection

The core provision of the January 2026 bill remains consistent with S. 1838 from the 118th Congress carries new urgency. The legislation mandates that credit card issuing banks with assets exceeding $100 billion, a threshold covering approximately 30 financial institutions, must enable at least two unaffiliated payment networks on their credit cards. One of these networks must be outside the Visa-Mastercard sphere, such as NYCE, Star, or Shazam.

This “dual routing” requirement attacks the exclusivity that currently allows Visa and Mastercard to set non-negotiable interchange rates for 80% of the U. S. market. By forcing banks to compete for merchant transaction volume based on fees and security rather than default exclusivity, the NRF projects annual savings of $15 billion for merchants and consumers. The 2026 text also includes strengthened provisions against “proprietary security standards” used by networks to technically block competitor routing, a direct response to evasion tactics observed in the debit card market following the 2010 Durbin Amendment.

“The courts have confirmed what Main Street has known for years: Visa and Mastercard not negotiate until the law forces them to. The settlement rejection in November proved that litigation has reached its limit. Legislation is the only route to a free market.”
, Stephanie Martz, Chief Administrative Officer and General Counsel, National Retail Federation (January 14, 2026)

Lobbying Warfare: The 2025 Escalation

The lead-up to the January 2026 reintroduction witnessed the most expensive lobbying battle in the history of the payments industry. Following the November 2025 settlement failure, the Electronic Payments Coalition (EPC) and individual card networks liquidated war chests to prevent the bill’s resurrection. Verified filings show that in the fourth quarter of 2024 alone, the EPC deployed $2. 72 million specifically to target swing votes in the Senate Banking Committee.

Visa Inc. escalated its own influence operations, spending $2. 27 million on in-house lobbying in the quarter of 2025, a 10. 19% increase from the previous quarter. The spending focused heavily on the “points defense”, the narrative that the CCCA would eliminate consumer credit card rewards. This argument, while disputed by merchant groups who point to the continued existence of rewards in regulated markets like the EU and Australia, remained the banking lobby’s most shield.

The Trump Endorsement Factor

A serious variable in the 2026 legislative calculus appeared on January 13, 2026, when President Donald Trump publicly endorsed the bill via Truth Social, stating the need to “stop the out of control Swipe Fee ripoff.” This populist fractured the traditional Republican opposition to market intervention. Historically, the banking lobby relied on GOP resistance to “price controls,” the President’s framing of swipe fees as a “hidden tax” on consumers aligned the bill with the administration’s inflation-fighting narrative.

The endorsement forced the Electronic Payments Coalition to pivot its strategy from ideological opposition to technical obstruction, claiming that the addition of alternative networks would compromise data security, a claim the NRF rebutted by citing the Federal Reserve’s existing security standards for debit routing.

Strategic: Litigation vs. Legislation

The NRF’s strategy in 2026 represents a “pincer movement.” While the antitrust litigation in the Eastern District of New York continues to grind toward a chance trial following the settlement rejection, the legislative push serves as the immediate threat to network stock valuations. The NRF that the 2024 swipe fee total of $187. 2 billion, up 8. 1% from the previous year, demonstrates that the card networks have priced in the cost of endless litigation. Only a statutory change to the market structure, they contend, can reset the pricing baseline.

This dual-track method forces Visa and Mastercard to defend on two fronts simultaneously: proving to a federal judge that their fees are the result of competition, while proving to Congress that introducing actual competition would destroy the market. The contradiction in these defenses became the focal point of the January 2026 Senate hearings.

Executive Endorsement: New Political Momentum for Fee Reform

The National Retail Federation’s (NRF) litigation strategy shifted from defensive negotiation to aggressive offense following the collapse of the “third attempt” settlement offer in November 2025. This pivot has gained decisive traction in early 2026, fueled by an endorsement from the White House that aligns executive power with the NRF’s long-standing demand for structural market reform.

The November 2025 Settlement Rejection

In November 2025, Visa and Mastercard proposed a new settlement to resolve the 20-year antitrust litigation, offering to lower interchange fees by 0. 10 percentage points for five years. The NRF and the Merchants Payments Coalition (MPC) immediately rejected the proposal, labeling it “window dressing” that failed to address the core anticompetitive structures of the payments market. NRF Chief Administrative Officer and General Counsel Stephanie Martz dismissed the offer as “meager,” noting that a 0. 10% reduction is statistically insignificant against average swipe fees that reached 2. 35% in 2024. The trade group that the settlement would have locked merchants into a bad deal while leaving the card networks’ central price-setting method and “honor all cards” rules intact.

White House Intervention and Legislative Fan-Out

The NRF’s refusal to settle was vindicated on January 13, 2026, when President Donald Trump publicly endorsed the Credit Card Competition Act (CCCA). In a statement on Truth Social, the President attacked the “out of control Swipe Fee ripoff,” signaling the direct executive support for the legislation. This endorsement coincided with the bill’s reintroduction by Senators Roger Marshall (R-Kan.) and Dick Durbin (D-Ill.), nationalizing the NRF’s legal argument. This political momentum has emboldened the NRF to pursue a dual-track strategy:

• Federal Litigation: Pushing for a full trial in the Eastern District of New York to the networks’ ability to centrally set interchange rates.
• State-Level Precedent: Leveraging the February 11, 2026, federal court ruling in Illinois, which upheld a state ban on charging swipe fees on taxes and tips. The NRF views this victory as a “proof of concept” that federal preemption laws do not protect card networks from state-level regulation.

“The card industry either just doesn’t get it or just doesn’t care. If the courts can’t fix this, it’s time for Congress to take action.”
, Stephanie Martz, NRF Chief Administrative Officer (November 2025)

Strategic Pivot to Trial

With the settlement table cleared, the NRF is preparing for a trial that the “honor all cards” rule, which forces merchants to accept high-fee rewards cards if they accept any card from the network. Legal analysts indicate that the NRF’s strategy relies on proving that Visa and Mastercard function as a cartel that insulates banks from price competition. The Illinois ruling provides a serious legal foothold, establishing that network rules are not immune to state consumer protection laws.

The Judicial Lens: Scrutiny of the November 2025 Proposal

In the United States District Court for the Eastern District of New York, Judge Margo K. Brodie has once again become the central arbiter of the U. S. payments ecosystem. Following the November 10, 2025, submission of a revised settlement agreement by Visa and Mastercard, the courtroom atmosphere shifted from anticipation to skepticism. The proposal, intended to cure the defects of the rejected June 2024 deal, offered a 10 basis point reduction in interchange fees, up from the previous four basis points, and a modification to the “Honor All Cards” rule. yet, during preliminary hearings in late 2025 and early 2026, Judge Brodie’s line of inquiry signaled that the card networks’ concessions might still fail to meet the Second Circuit’s “fair, reasonable, and adequate” standard for class-action settlements.

The “Paltry” Precedent

Judge Brodie’s scrutiny is deeply rooted in her June 25, 2024, memorandum, where she famously characterized the networks’ previous $30 billion relief package as “paltry” compared to the estimated $100 billion in annual fees paid by merchants. The revised November 2025 offer, while mathematically larger, faces the same structural criticism. The increase from a 0. 04% to a 0. 10% fee reduction does not alter the fundamental economics of a market where average swipe fees exceed 2. 26% and have risen by over 70% since 2020.

In her analysis of the new terms, Judge Brodie focused on the temporary nature of the relief. The proposed five-year cap on rates and the eight-year duration for rule changes offer no permanent injunction against future fee hikes. This mirrors her 2024 objection that the settlement provided “meager and temporary” benefits while granting Visa and Mastercard a broad liability release that would immunize them from future antitrust claims. The court’s skepticism suggests that a 10 basis point cut, amounting to roughly $0. 10 on a $100 transaction, functions more as a rounding error than a correction of monopoly pricing power.

Deconstructing the “Honor All Cards” Modification

A serious component of the revised deal is the relaxation of the “Honor All Cards” (HAC) rule, theoretically allowing merchants to decline high-cost premium and commercial cards while still accepting standard consumer cards. On paper, this addresses a core merchant grievance. yet, Judge Brodie’s examination has probed the operational reality of this concession. The “all or nothing” architecture of modern digital wallets and point-of-sale systems makes selective acceptance technically burdensome for millions of small businesses.

“The Court must determine whether the proposed injunctive relief provides a practical method for merchants to steer competition, or if it offers a theoretical right that is impossible to exercise at the register.”

The NRF and other objectors have argued that without a requirement for clear, visual differentiation of card types on the physical plastic and in digital wallets, the “right to decline” is unenforceable. Judge Brodie’s questioning has highlighted this gap, noting that if a cashier cannot distinguish a “Premium Rewards” Visa form a “Standard” Visa at a glance, the rule change holds zero value for Main Street retailers.

The Opt-Out Controversy

Procedural fairness remains a primary hurdle. The 2024 rejection was partly driven by the settlement’s failure to treat all merchants equitably, particularly regarding the ability to opt-out. The November 2025 proposal attempts to bind the entire class of 12 million merchants to the injunctive relief, stripping them of the right to sue for better terms in the future. Judge Brodie has expressed concern that this “mandatory” class structure deprives merchants of their due process rights, forcing them to accept a deal that major trade groups like the NRF and NACS have explicitly rejected.

The “Window Dressing” Critique

The phrase “window dressing” has permeated the proceedings, used by objectors to describe the revised terms. Judge Brodie’s scrutiny reveals a judicial awareness that the card networks may be offering cosmetic changes to preserve their pricing dominance. By focusing on the rate reduction rather than the posted rate, the court has identified that Visa and Mastercard could chance offset the 10 basis point cut by raising other network fees, a loophole that was a fatal flaw in the 2024 proposal and remains insufficient closed in the 2025 revision.

As the litigation moves toward a chance second rejection or a forced trial, the Eastern District of New York stands as the firewall between the card networks’ settlement strategy and the merchants’ demand for structural reform. Judge Brodie’s rigorous adherence to the Second Circuit’s antitrust standards indicates that “peace at any price” is not a verdict she is to sign.

The Arithmetic of Exclusion

The collapse of the November 2025 settlement proposal hinged on a single, devastating statistic: 85 percent. While Visa and Mastercard offered to cap interchange fees at 1. 25 percent for “standard” credit cards, the National Retail Federation (NRF) produced data showing that 85 percent of credit cards in circulation are rewards cards, which were explicitly excluded from the proposed cap. This composition error rendered the settlement’s primary concession mathematically irrelevant for the vast majority of U. S. merchants.

By limiting fee relief to non-rewards cards, a shrinking category used primarily by subprime borrowers or inactive accounts, the card networks proposed a price control on a product that almost no one uses. The NRF’s legal filings in the Eastern District of New York argued that this structure was not a concession a diversion, leaving the “Honor All Cards” rule to force acceptance of the remaining 85 percent of cards at uncapped, premium rates.

The Premium Rate Differential

The financial impact of this market segmentation is visible in the interchange rate tables published by the networks. As of October 2025, the cost gap between processing a basic card and a premium rewards card had widened to over 100 basis points. Merchants are contractually obligated to pay the higher rate whenever a customer presents a premium card, with no ability to decline the specific card type while accepting the network brand.

Under the rejected settlement, a merchant processing a $100 transaction with a Visa Infinite card would continue to pay approximately $2. 40 to $2. 70 in fees. The 1. 25 percent cap would only apply to a basic card, reducing that fee to $1. 35. yet, because the Infinite card is marketed aggressively to high-spending consumers, the merchant rarely sees the lower-cost card. The weighted average fee remains high because the mix of cards is heavily skewed toward the “Super-Premium” tier.

The Wealth Transfer Engine

The economic engine driving this is the cross-subsidy model. Federal Reserve data from 2025 indicates that 86 percent of interchange fees are used to fund rewards programs. This creates a pattern where merchants raise retail prices to cover the cost of swipe fees, forcing cash and debit card users, frequently lower-income consumers, to subsidize the air miles and cash-back bonuses of affluent credit card holders.

“The settlement proposed a cap on the cards in your grandmother’s wallet, while leaving the cards in a CEO’s wallet uncapped. Since the CEO spends ten times more, the relief was illusory.” , Legal filing, National Retail Federation, December 2025.

The “Honor All Cards” (HAC) rule is the linchpin of this system. Without HAC, a retailer could theoretically accept Visa Traditional cards (at 1. 43 percent) while declining Visa Infinite cards (at 2. 30 percent). The networks enforce HAC to prevent this market segmentation, ensuring that the high-fee cards have the same acceptance utility as low-fee cards. The NRF’s litigation strategy focuses on breaking this specific tie, arguing that if the networks want to charge different prices for different products, merchants must have the right to selectively purchase those products.

The “Window Dressing” Loophole

The term “window dressing,” used by NRF General Counsel Stephanie Martz, specifically referred to the optical illusion of the 1. 25 percent cap. By applying the cap only to the “Standard” interchange category, the networks could technically claim they offered a rate reduction. yet, bank issuers have spent the last decade migrating customers out of “Standard” products and into “Signature” and “World Elite” products.

Data from the 2024 Nilson Report confirms that purchase volume on Visa and Mastercard products grew by 6. 3 percent, driven almost entirely by rewards-heavy spending. The migration is not accidental; banks earn significantly higher revenue from the uncapped interchange categories. By excluding these categories from the settlement, the networks protected their primary revenue stream while offering concessions on a dying product line.

This structural reality, 85 percent rewards penetration combined with the HAC rule, means that any settlement failing to address premium card fees is mathematically incapable of lowering merchant costs. The NRF’s rejection of the November 2025 offer was not a negotiation tactic a recognition that the proposal did not interact with the actual composition of the U. S. payments market.

The ‘Smoke and Mirrors’ Verdict: MPC’s Immediate Mobilization

The Merchant Payments Coalition (MPC) wasted no time in the November 10, 2025, settlement proposal, characterizing the offer as a tactical recycling of the failed 2012 and 2024 agreements. Within 24 hours of the filing in the U. S. District Court for the Eastern District of New York, the MPC, representing the National Association of Convenience Stores (NACS), the National Grocers Association (NGA), and other major trade bodies, launched a coordinated “Mass Opt-Out” directive. The coalition’s analysis, distributed to its member base of over 2. 7 million retail locations, labeled the proposed 10-basis-point reduction as “mathematically insignificant” against a backdrop of swipe fees that hit a record $187. 2 billion in 2024.

Doug Kantor, MPC Executive Committee member and NACS General Counsel, issued a blistering critique that became the rallying cry for the opt-out movement. “This is the third attempt to settle this case, and the card industry either just doesn’t get it or just doesn’t care,” Kantor stated on November 11, 2025. “The proposal is smoke and mirrors. It offers a temporary, microscopic fee cut in exchange for a permanent surrender of merchants’ rights to challenge the central price-fixing method that drives inflation.” This narrative of “Litigation Failure”, the idea that the class action method had been captured by the defendants to secure a cheap release from liability, underpinned the strategy to push merchants toward individual litigation rather than shared capitulation.

Deconstructing the 10 Basis Point ‘Trifle’

The core of the MPC’s mobilization strategy rests on a rigorous financial deconstruction of the settlement’s terms. The proposal offers to lower the average interchange rate by 0. 10% (10 basis points) for a period of five years and cap standard consumer credit interchange rates at 1. 25% (125 basis points). The MPC’s data science teams immediately countered these figures with verified market realities.

The coalition emphasized that the 10-basis-point reduction is a “trifle” compared to the 33-basis-point increase merchants absorbed between 2010 and 2024. also, the MPC highlighted a serious loophole: the settlement applies only to interchange fees (paid to banks), leaving network fees (paid to Visa and Mastercard) completely uncapped. “Being able to collect a toll to offset the cost of another toll does not change the fact that the initial toll is too high,” Kantor argued, pointing out that the networks could simply raise their own fees to recapture any revenue lost by the banks.

The ‘Honor All Cards’ Ultimatum

Beyond the financials, the MPC’s opt-out campaign focuses on the structural failure of the settlement to address the “Honor All Cards” (HAC) rule. This rule forces merchants to accept all credit cards issued by a network if they accept any, regardless of the interchange rate attached to the card. The November 2025 proposal offered a modification: merchants could choose to reject “premium” rewards cards while keeping “standard” cards. yet, the MPC exposed this as a hollow concession.

“The settlement’s ‘choice’ is an illusion. It allows merchants to reject premium cards, 85% of all credit cards issued today are rewards cards. Rejecting them means rejecting the vast majority of customers. This is not a choice; it is a poison pill designed to look like a concession.”
, Stephanie Martz, Chief Administrative Officer, National Retail Federation (November 12, 2025)

By framing the HAC modification as a “poison pill,” the MPC successfully communicated to small and medium-sized businesses (SMBs) that the settlement would not actually provide the ability to steer customers to lower-cost payment methods. This messaging was serious in aligning SMBs, who frequently absence the legal resources to analyze complex antitrust settlements, with the aggressive stance of large retailers.

Replicating the 2012 Opt-Out Wave

The strategic blueprint for the 2026 mass opt-out is drawn directly from the collapse of the 2012 settlement. In that iteration, major retailers like Target, Amazon, and Home Depot opted out, eventually forcing a $5. 7 billion settlement to be overturned on appeal. The MPC is industrializing this process for the 2026 pattern. By December 2025, the coalition had established a “Settlement Rejection Portal,” providing templates and legal guidance for merchants to formally object to the settlement before Judge Margo Brodie.

The goal is to surpass the 25% threshold of transaction volume opting out, a figure that would legally threaten the viability of the class action settlement. With the National Retail Federation and the National Association of Convenience Stores leading the charge, the coalition estimates it already influences over 40% of the relevant transaction volume. This “block voting” power holds the settlement hostage, forcing the card networks to either return to the negotiating table with structural reforms or face a chaotic of thousands of individual antitrust lawsuits.

The Pivot to Congressional Action

The mass opt-out is not an end in itself a lever to force legislative action. The MPC has explicitly linked the rejection of the settlement to the reintroduction of the Credit Card Competition Act (CCCA) in January 2026. The argument presented to lawmakers is simple: the judiciary has failed for twenty years to solve the market failure, and the card networks have proven they only offer “window dressing” in court. Therefore, the only remaining remedy is a legislative mandate for competition.

Jennifer Hatcher, Chief Public Policy Officer for the Food Industry Association, underscored this dual-track strategy. “We are not just fighting in the courtroom,” Hatcher noted. “Every merchant who opts out sends a message to Congress that the current legal framework is incapable of restraining this duopoly. The settlement rejection is the fuel for the legislative fire we are lighting in 2026.”

Consumer Cost Analysis: The $1, 200 Annual Household Impact

The abstract legal battles in the Eastern District of New York frequently obscure the tangible economic reality facing American households. While the antitrust litigation is technically a dispute between merchants and card networks, the financial load of the interchange fee system is borne by the consumer. By the close of 2025, data from the Merchants Payments Coalition (MPC) and the National Retail Federation (NRF) confirmed that the average American family pays approximately $1, 200 annually in hidden swipe fees, a figure that has risen in lockstep with inflation and the expansion of rewards-based credit card usage.

The Pass-Through method

The card networks frequently that interchange fees are a B2B cost absorbed by retailers. yet, this claim ignores the fundamental economics of the retail sector, where net margins frequently hover between 1% and 3%. In 2024, total U. S. swipe fees reached a record $187. 2 billion, a sum that exceeds the total profits of retail sub-sectors combined. Because these fees are the second-highest operating expense for most merchants, surpassed only by labor, they are mathematically impossible to absorb without insolvency.

Consequently, these costs are into the shelf price of every good and service, from gasoline to groceries. This “pass-through” effect functions as a hidden consumption tax. Unlike a sales tax, which is transparent and set by elected officials, swipe fees are set by the networks and concealed within the final price. When a consumer buys a $100 basket of groceries, approximately $2. 35 of that cost goes directly to cover the interchange fees, regardless of whether the consumer pays with a premium rewards card, a debit card, or cash.

The Inflation Multiplier

The structure of interchange fees, calculated as a percentage of the transaction value rather than a flat fee, creates a unique inflationary feedback loop. As the price of goods rises due to general inflation, the revenue collected by Visa and Mastercard rises automatically, even if the cost of processing the transaction remains static. This phenomenon, described by economists as the “inflation multiplier,” ensures that card networks profit disproportionately during periods of high inflation.

In 2024, the average swipe fee rate for Visa and Mastercard credit cards rose to 2. 35%, up from 2. 02% in 2010. This increase occurred simultaneously with a 70% surge in total swipe fee volume since the pandemic. The result is a cost structure: as prices rise, fees rise, which in turn forces prices higher to maintain margins.

Regressive Economics: The Reverse Robin Hood Effect

The most severe investigative finding regarding the $1, 200 household impact is its regressive nature. The U. S. payments system orchestrates a wealth transfer from low-income cash and debit users to high-income credit card users. Because merchants generally apply the same shelf price to all customers (to avoid friction or violating network rules), cash buyers subsidize the rewards points and airline miles accrued by premium cardholders.

“The lowest-income households, those earning $20, 000 or less, pay an estimated annual transfer of $21 to the card system, while households earning over $150, 000 receive a net subsidy of over $750 in rewards value. The $1, 200 average cost is not borne equally; it falls hardest on those who cannot access the credit products that drive the fees.”

Seasonal Impact Analysis: 2025 Data

The cumulative effect of these fees becomes most visible during high-spend periods. Analysis of the 2025 holiday shopping season and back-to-school period reveals the granular impact of swipe fees on family budgets.

During the 2025 holiday season alone, swipe fees siphoned approximately $20 billion from consumer purchasing power. The Merchants Payments Coalition noted that for the average family, the $21 holiday “swipe tax” was equivalent to the cost of a popular toy or a holiday meal. While these individual amounts may appear trivial in isolation, their aggregate impact is substantial. The $3 billion paid in swipe fees during the back-to-school season represents money that was diverted from educational materials to financial services revenue.

The Disconnect Between Cost and Value

A central tenet of the NRF’s litigation strategy is the disconnect between the rising cost of swipe fees and the stagnant cost of service provision. While the fees paid by consumers have tripled since 2010, the technological cost of processing a transaction has plummeted due to Moore’s Law and cloud computing. The $1, 200 annual household cost does not reflect a $1, 200 value in transaction processing; rather, it reflects the pricing power of a duopoly protected by the Honor All Cards rule.

The rejection of the November 2025 settlement offer was driven largely by the realization that a 10 basis point reduction would have saved the average family less than $50 annually, a negligible amount compared to the $1, 200 load. For the NRF and its members, the litigation is no longer just about merchant margins; it is about a pricing structure that has become a significant line item in the American household budget.

SECTION 11 of 22: Small Business Insolvency: NACS Data on Margin

The Arithmetic of Failure: When Fees Exceed Profit

For the National Association of Convenience Stores (NACS), the rejection of the November 2025 settlement offer was not a matter of legal strategy, of mathematical survival. Data released by NACS in early 2026 reveals a structural inversion in the economics of small retail: for of the convenience sector, credit card interchange fees exceed pre-tax net profit.

The “insolvency gap,” as defined by NACS analysts, emerges from the between the convenience sector’s average pre-tax profit margin of 2. 47 percent and the escalating cost of accepting Visa and Mastercard credit products. By the close of 2025, the average swipe fee rate for premium rewards cards had climbed to 2. 94 percent, confiscating the entire profit margin of a transaction before the merchant could bank a single cent.

2024-2025 Data: The 84 Percent Surge

The financial pressure on small operators accelerated drastically in the twenty-four months leading up to the settlement rejection. According to the NACS State of the Industry Report released in January 2026, total swipe fees paid by the convenience sector surged to $19. 7 billion in 2024, an 84. 1 percent increase since 2020. This rise occurred even as inside-store transaction counts remained relatively flat, isolating fee rate hikes and the proliferation of high-interchange rewards cards as the primary drivers of cost.

Doug Kantor, General Counsel for NACS, characterized the 2025 as “unsustainable” for the 60 percent of the industry comprised of single-store operators. “We have reached a verified tipping point where the banking duopoly extracts more value from a convenience store transaction than the business owner who pays the rent, stocks the shelves, and employs the staff,” Kantor stated in a briefing to the Senate Judiciary Committee.

The “Inflation Multiplier” on Fuel Retailers

The of margins is most acute at the fuel pump, where interchange fees function as an “inflation multiplier.” Because swipe fees are calculated as a percentage of the total transaction value, every increase in the price of gasoline automatically generates a windfall for card networks, regardless of the retailer’s fixed margin on fuel.

NACS data from 2024 indicates that when gas prices spiked, swipe fees frequently consumed 10 cents or more per gallon, frequently exceeding the retailer’s net profit on that same gallon. This forces small fuel retailers into a pattern of insolvency: they must raise prices to cover the fees, which in turn increases the fee amount, further compressing margins. The November 2025 settlement proposal, which offered a temporary 10-basis-point reduction, was calculated to save the average single-store operator less than $80 per month, an amount NACS leadership dismissed as “statistically irrelevant” against the $10, 000+ annual increase in fees per store observed since 2021.

NACS Official Statement (December 2025):
“The card networks’ offer to reduce fees by 0. 10% while they simultaneously raised rates by 0. 80% over the last three years is not a settlement; it is a distraction. For a family-owned convenience store operating on 2% margins, this proposal offers no route away from insolvency.”

Comparative Metrics: The Insolvency Gap (2015-2025)

The following table illustrates the widening between operating costs and fee liabilities for U. S. convenience retailers. The data, aggregated from NACS and CMSPI reports, highlights the 2022-2025 period where fee growth decoupled entirely from retail sales growth.

The 2025 Breaking Point

By late 2025, the “Fee load” metric, the percentage of pre-tax profit consumed by swipe fees if a retailer accepted only credit cards, crossed the 100 percent threshold for the time in the dataset’s history. This statistical reality underpinned the NRF and NACS decision to reject the settlement. Accepting a deal that locked in 2025 rates minus ten basis points would have codified a business model where the payment processor is guaranteed a higher return than the merchant.

The insolvency risk is not theoretical. NACS membership surveys conducted in Q3 2025 reported that 18 percent of single-store operators were considering ceasing credit card acceptance or closing operations entirely due to payment processing costs. This data provided the evidentiary foundation for the “irreparable harm” arguments filed by the NRF in the Eastern District of New York, asserting that the card networks’ pricing power had moved beyond extraction to expropriation.

SECTION 12 of 22: European Union Benchmarks: The 200 Basis Point

The Atlantic Divide: A 700% Premium

The central economic exhibit in the National Retail Federation’s (NRF) 2026 litigation strategy is a single, clear geographic comparison: the 200 basis point chasm between American and European interchange fees. While U. S. merchants grappled with a weighted average credit card interchange rate of approximately 2. 35% in 2024, their counterparts in the European Union operated under a strict regulatory cap of 0. 30%. This means American businesses pay nearly eight times the fees for processing the exact same Visa or Mastercard transaction as a merchant in Paris or Berlin.

This “Atlantic Divide” serves as the NRF’s primary evidence that U. S. interchange rates are not the result of market forces of supracompetitive pricing power. In filings submitted to the Eastern District of New York in December 2025, the NRF argued that the card networks’ continued profitability in Europe, where fees are capped at roughly one-eighth of U. S. levels, demonstrates that the 2. 26% to 3. 00% fees charged in the United States are artificially inflated monopoly rents rather than necessary operational costs.

Regulation (EU) 2015/751: The Benchmark

The benchmark for this argument is Regulation (EU) 2015/751, the Interchange Fee Regulation (IFR), which took full effect on December 9, 2015. The IFR imposed hard caps across the European Economic Area (EEA):

The NRF’s legal team emphasizes that in the decade following the implementation of these caps, the European payments ecosystem did not collapse. Instead, transaction volumes in the EU continued to grow, and Visa and Mastercard maintained healthy operating margins in the region. This historical data point was weaponized in November 2025 to reject the networks’ offer of a 10 basis point reduction. When viewed against the 200 basis point gap, a 0. 10% cut was characterized by retail executives not as a concession, as a rounding error.

The “Pass-On” Defense and the UK Ruling

A serious development in February 2026 provided fresh ammunition for U. S. merchants. The UK’s Competition Appeal Tribunal (CAT) issued a landmark ruling in the long-running Interchange Umbrella Proceedings. The tribunal rejected the card networks’ “pass-on” defense, the argument that merchants did not suffer actual damages because they simply raised consumer prices to offset high fees.

The CAT found that while acquirers passed 100% of the interchange costs to merchants, the merchants themselves absorbed the majority of these costs rather than passing them to consumers. This judicial finding validates the NRF’s damages model: high swipe fees are a direct hit to merchant bottom lines, not a neutral pass-through cost. The ruling undermines the networks’ public relations narrative that lowering fees would not benefit consumers, shifting the load of proof back to Visa and Mastercard to justify their pricing structures.

The Profitability Paradox

The litigation also the “profitability paradox.” In July 2024, Visa and Mastercard voluntarily agreed to extend caps on inter-regional transactions (cards issued outside the EU used within the EU) until 2029. This agreement kept fees for online transactions at 1. 15% for debit and 1. 5% for credit, still significantly lower than domestic U. S. rates.

“If Visa and Mastercard can voluntarily agree to a 1. 5% cap on complex cross-border transactions in Europe and remain profitable, there is no economic justification for a domestic U. S. transaction to cost a merchant 2. 5% or more, other than the absence of competition.”
, Excerpt from NRF Amicus Brief, December 2025

This gap highlights the core of the antitrust complaint: costs are not driving prices; use is. In Europe, where regulation limits use, prices are low. In the United States, where the “Honor All Cards” rule binds merchants to accept any rate the networks set, prices are high.

The Rewards Myth vs. European Reality

The card networks defend the U. S. premium by citing strong rewards programs, arguing that EU-style caps would eliminate cash-back and travel points for American consumers. yet, the NRF’s 2025 data analysis counters this by pointing to the continued existence of rewards programs in Europe, albeit funded differently.

The lies in who funds the rewards. In the U. S., the merchant funds the consumer’s rewards through the interchange fee. In the EU, rewards are frequently funded by annual card fees or lower-value banking relationships. The NRF that the U. S. model forces cash-paying customers and low-margin merchants to subsidize the luxury travel of premium cardholders, a wealth transfer method that the EU successfully dismantled a decade ago.

SECTION 13 of 22: Digital Wallet Fees: Unregulated Costs in the Mobile Payment Stack

The 15-Basis Point “Apple Tax” and the Issuer Pass-Through

While the National Retail Federation’s primary litigation remain Visa and Mastercard, the 2026 strategy has aggressively expanded to target the “unregulated third ” of the payment stack: digital wallet operators. At the center of this new front is the 15-basis point (0. 15%) fee Apple charges issuers for every credit transaction processed through Apple Pay. Unlike the interchange fee, which is ostensibly paid by the merchant to the bank, this wallet fee is charged by the device manufacturer to the issuer. yet, NRF forensic accounting and issuer disclosures in the ongoing antitrust discovery have revealed that this cost is systematically preserved within the interchange rate, creating a price floor that prevents swipe fee reductions.

Data verified in the Department of Justice’s March 2024 antitrust filing against Apple confirms that this fee generated an estimated $1 billion annually by 2025, a cost issuers maintaining high interchange rates. When merchants accept a Visa card via a digital wallet, they are not paying the network and the bank; they are indirectly funding the device manufacturer’s revenue stream. The NRF this structure violates the spirit of the Durbin Amendment by an uncapped, non-negotiable fee into the transaction cost, which is then shielded from market competition by the inability of merchants to reject specific wallets without rejecting the underlying card brand.

Regulatory Whiplash: The Rise and Fall of the CFPB Wallet Rule

The legal for digital wallets underwent a volatile shift between late 2024 and mid-2025, leaving merchants exposed to unchecked fee structures. On November 21, 2024, the Consumer Financial Protection Bureau (CFPB) finalized a rule defining “larger participants” in the market for general-use digital consumer payment applications. The rule, which took effect January 9, 2025, was designed to subject companies facilitating over 50 million annual transactions to the same supervisory scrutiny as large banks. For a brief window, it appeared that digital wallet operators would be forced to disclose fee structures and operational risks.

This regulatory oversight was short-lived. On May 9, 2025, President Donald Trump signed a Congressional Review Act (CRA) joint resolution (S. J. Res. 28) disapproving the rule, nullifying the CFPB’s authority to supervise these non-bank entities. The repeal left the digital wallet sector in a federal regulatory vacuum just as mobile payment adoption crossed the 60% threshold for U. S. point-of-sale transactions. The NRF has this “regulatory U-turn” in its 2026 filings, arguing that the absence of federal oversight makes judicial intervention the only remaining avenue to check the market power of wallet providers who control the “last inch” of the payment infrastructure.

The “Honor All Devices” Trap

The NRF’s litigation strategy following the November 2025 settlement rejection explicitly links the “Honor All Cards” rule to what they term the “Honor All Devices” de facto mandate. Because card network rules prohibit merchants from discriminating against valid cards based on the method of presentation, a retailer cannot block a transaction initiated via a high-fee digital wallet without violating their acceptance agreement for the underlying card brand.

This tying arrangement forces merchants to accept the “mobile stack” costs. As of January 2026, the cost of acceptance for a digital wallet transaction frequently includes:

The “Wallet Operator Fee” is technically paid by the issuer, the NRF’s economic experts it creates a “waterbed effect,” where banks raise or maintain other fees to offset the leakage to the device manufacturer.

NFC Access and the DOJ Antitrust Parallel

The NRF’s 2026 strategy also use the Department of Justice’s ongoing antitrust lawsuit against Apple (U. S. v. Apple Inc.), filed in March 2024. The DOJ alleges that the smartphone maker’s refusal to grant third-party developers access to the Near Field Communication (NFC) chip prevents banks and other innovators from creating competing wallets that could bypass the 0. 15% fee.

“Apple’s fees are a significant expense for issuing banks and cut into funding for features and benefits that banks might otherwise offer… It is its own form of an interchange fee.”
, U. S. Department of Justice Complaint, March 2024

By January 2026, the NRF began filing amicus briefs supporting the DOJ’s position, arguing that if banks were permitted to launch their own “tap-to-pay” functionality on iOS devices without the Apple Pay toll, competition would naturally drive down the aggregate cost of acceptance. The refusal of the card networks to support open NFC access standards is a key component of the NRF’s collusion allegations, asserting that the networks prefer the high-fee over a fragmented, competitive wallet ecosystem.

2026 Legislative Pivot: The Digital Wallet Loophole

With the reintroduction of the Credit Card Competition Act (CCCA) on January 13, 2026, the NRF has lobbied for language that specifically addresses the digital wallet loophole. The new draft legislation includes provisions that would prohibit card networks from penalizing merchants who incentivize consumers to use lower-cost payment methods, chance including “direct-to-bank” wallets if NFC access is liberalized.

The collapse of the 2025 settlement offer was driven in part by its failure to address these modern form factors. The settlement proposed a 10-basis point reduction in interchange ignored the 15-basis point wallet fee and the rising costs of tokenization. For the NRF, any settlement that does not decouple the device fee from the transaction or allow for “wallet routing” choice is mathematically insufficient to offset the compound growth of mobile payment costs.

SECTION 14 of 22: Bank Issuer Profits: Returns on Equity from Interchange Revenue

The “Alpha” of Antitrust: Quantifying Excess Returns

The collapse of the November 2025 settlement proposal pivoted the National Retail Federation’s (NRF) legal focus toward a single, devastating financial metric: the Return on Equity (ROE) of credit card issuing banks. While Visa and Mastercard set the rates, the issuing banks, specifically the dominant “monoline” issuers like JPMorgan Chase, Capital One, and Citi, are the primary beneficiaries of the revenue stream. In the wake of the settlement rejection, the NRF’s litigation team has moved to expose the widening chasm between the cost of processing a transaction and the price charged to merchants, arguing that this is irrefutable evidence of a broken market.

Data filed with the Federal Reserve and analyzed in 2024 reveals that credit card operations are not profitable; they are statistical anomalies within the banking sector. According to the Federal Reserve’s Report to the Congress on the Profitability of Credit Card Operations (2025), credit card banks reported a Return on Assets (ROA) of 3. 87% in 2024, nearly triple the commercial banking industry average of 1. 38%. When leveraged, this to Returns on Equity exceeding 30% for monoline card portfolios, a margin that dwarfs the 3% to 6% average profit margins of the retailers paying the fees.

Judicial Note: “The persistence of profit margins three to four times higher than the industry norm, maintained over a decade even with falling technological costs, suggests an absence of competitive pricing pressure.” , Observation by Judge Margo K. Brodie during pre-trial hearings, December 2025.

The Cost-Price Decoupling

The core of the plaintiffs’ new economic argument is the “decoupling” of fees from operating costs. In a functional market, technological drive prices down. yet, the cost to issuers for processing a transaction has plummeted while interchange fees have risen.

Between 2009 and 2025, the issuer’s per-transaction processing cost dropped by approximately 47%, falling from 7. 7 cents to roughly 4. 1 cents. Yet, the interchange fee on a standard $100 credit card transaction remains anchored between $2. 00 and $2. 50. This 5, 000% markup over marginal cost is the “surplus” that funds the massive rewards programs used to secure consumer loyalty, forcing merchants to subsidize the marketing budgets of the banks that sue them.

Issuer Specifics: The “Alpha” Generators

The financial disclosures of major issuers in early 2026 provided fresh ammunition for the NRF. JPMorgan Chase, the largest card issuer in the U. S., reported a record $18. 1 billion in payments revenue for 2024, contributing to a firm-wide Return on Tangible Common Equity (ROTCE) of 20%. Similarly, Capital One saw its interchange and fee revenue surge 21% year-over-year in key quarters of 2025, following its acquisition of Discover.

These returns are not passive; they are engineered. By maintaining high interchange rates, issuers can offer 2% or 3% cash back to consumers. This creates a “reverse Robin Hood” effect where cash and debit users (frequently lower-income) subsidize the premium rewards of affluent credit card users. The NRF that without the “Honor All Cards” rule, merchants would reject these high-cost rewards cards, forcing banks to compete on efficiency rather than on who can extract the largest subsidy from the point of sale.

The “Rewards Defense” Crumbles

For years, banks defended high interchange fees by claiming they were necessary to cover fraud losses and innovation. yet, 2024 data shows that fraud losses and charge-offs, while rising, account for a fraction of the total interchange revenue. The Federal Reserve Bank of New York noted that even after adjusting for default risk, credit card lending generates an “alpha”, or excess return, of 1. 17% to 1. 44% over other banking activities.

This “alpha” is the target of the 2026 litigation strategy. The NRF intends to demonstrate that these excess profits are not the result of superior business acumen, of a cartel-like price-fixing structure that insulates issuers from market forces. If the court accepts that these margins represent monopoly rents rather than competitive profits, the justification for the current interchange fee structure, and the 10 basis point reduction offered in 2025, evaporates.

Network Fee Transparency: Demanding Data on Non-Interchange Costs

Following the rejection of the November 2025 settlement proposal, the National Retail Federation (NRF) and the Merchants Payments Coalition (MPC) have opened a new front in their antitrust offensive: a forensic demand for transparency regarding “network fees.” While interchange fees, paid to issuing banks, have historically dominated the litigation, the NRF’s legal team is targeting the unclear of “scheme fees,” “access dues,” and “assessment fees” that flow directly to Visa and Mastercard’s bottom lines. The retail lobby that these non-interchange costs function as a hydraulic method: when interchange is compressed by regulation or settlement, network fees expand to maintain the total revenue extraction.

The “Whac-A-Mole” Fee Structure

The core of the NRF’s post-rejection strategy rests on data indicating that network fees have become the primary vehicle for cost increases, circumventing caps on interchange. Unlike interchange fees, which are theoretically passed to card issuers to cover fraud and credit risk, network fees are retained entirely by the card schemes. In legal filings submitted to the Eastern District of New York in early 2026, merchant plaintiffs data from payments consultancy CMSPI, which estimated that fee changes introduced in April 2024 alone added over $500 million in annual costs to U. S. merchants. Crucially, more than half of this increase was driven by network fees rather than interchange.

The “Whac-A-Mole” was explicitly highlighted in the NRF’s opposition to the November 2025 settlement. The rejected deal offered a temporary reduction of 10 basis points in interchange contained no binding restrictions on network fees. Merchant counsel argued that without a concurrent cap on these non-interchange costs, Visa and Mastercard remained free to neutralize any relief by raising assessment rates. This concern is grounded in historical precedent: between 2011 and 2024, the networks introduced or increased specific line-item fees more than 40 times, frequently timed to coincide with regulatory scrutiny of interchange rates.

Piercing the “Assessment” Veil

The litigation strategy focuses on compelling the networks to disclose the cost basis for these fees. In January 2026, the NRF filed a motion seeking full discovery of the internal methodology used to set “assessment fees.” These fees, which ostensibly cover the cost of maintaining the payment network infrastructure, are charged as a percentage of gross transaction volume. The NRF contends that because the marginal cost of processing a digital transaction is near zero and declining with technology, the correlation between rising assessment fees and rising transaction volumes constitutes “monopoly rent-seeking” rather than cost recovery.

Specific scrutiny is being applied to the “Acquirer Brand Volume Fee” and “Network Access and Brand Usage (NABU)” fees. In 2024, Mastercard increased its Acquirer Brand Volume Fee by 0. 01%, a seemingly small increment that generated approximately $259 million al annual revenue based on fiscal 2023 transaction volumes. The NRF’s legal team that these hikes are arbitrary revenue generators devoid of value-add services. By demanding the internal communications regarding these price changes, the plaintiffs aim to prove that the fees were calibrated specifically to offset chance interchange reductions proposed in earlier settlement talks.

“They made a show of ‘settling’ legal claims, nothing in the settlement limits the fees that go directly to Visa and Mastercard. That leaves them free to continue to increase these fees and they are doing it already. The only answer is for Congress to pass the Credit Card Competition Act and bring fair market competition to the badly broken payments market.”
, Doug Kantor, General Counsel, National Association of Convenience Stores (NACS), April 2024

The $187. 2 Billion Reality

The urgency of the transparency demand is underscored by the aggregate cost data. According to the Nilson Report, total credit and debit card swipe fees paid by U. S. merchants reached a record $187. 2 billion in 2024, a 70% increase since 2020. While interchange accounts for the lion’s share, the network fee component has grown at a faster relative rate. CMSPI analysis suggests that for large enterprise merchants, network fees comprise up to 20% of their total cost of acceptance, up from less than 10% a decade ago.

This shift in cost composition complicates the “pass-through” defense frequently used by networks. Visa and Mastercard frequently that they do not set interchange rates, banks do, and therefore cannot be held solely liable for high costs. yet, network fees are set centrally and unilaterally by the schemes. By isolating these costs in the discovery phase, the NRF intends to strip away the “bank-set fee” defense and expose the networks’ direct role in inflating the cost of acceptance. The demand for data extends to “phantom fees”, charges for services like tokenization or fraud monitoring that merchants are frequently automatically enrolled in and cannot opt out of without losing liability protection.

As the litigation moves toward a chance 2027 trial date, the battle over non-interchange costs has become the pivot point. The NRF is no longer satisfied with a settlement that trims the interchange “headline” rate while leaving the network fee “fine print” untouched. The demand is for a structural remedy that addresses the total cost of acceptance, preventing the card duopoly from simply reclassifying revenue streams to evade antitrust enforcement.

The 3 Percent Ceiling: A “Poison Pill” in the November Offer

The amended settlement proposal delivered by Visa and Mastercard on November 10, 2025, contained a provision the networks framed as a concession: a revised surcharge cap of 3 percent. This figure represented an increase from the 1 percent limit proposed in the rejected March 2024 agreement. yet, the National Retail Federation (NRF) and the Merchants Payments Coalition immediately branded the offer a “poison pill” rather than a compromise. Legal filings from late 2025 reveal the core of the dispute: the 3 percent cap acts as a price control that insulates the networks’ most profitable products, premium rewards cards, from market discipline. While the average processing fee for Visa and Mastercard transactions hovered near 2. 35 percent in 2025, the cost to accept “Infinite” and “World Elite” cards frequently breached the 3 percent threshold when assessment fees and processor markups were included. By capping surcharges at 3 percent, the settlement would have contractually forced merchants to subsidize the difference on the most expensive cards, neutralizing the surcharge’s primary economic function: steering consumers toward lower-cost payment methods.

The Arithmetic of the Surcharge Gap

The NRF’s litigation team argued that a static 3 percent cap ignores the costs of interchange fees, network assessments, and processor margins. For a merchant to break even on a premium card transaction, the surcharge must cover the *total* cost of acceptance, not just the interchange rate. The following table, reconstructed from expert witness testimony submitted to the Eastern District of New York in December 2025, demonstrates the financial shortfall merchants face under the proposed cap on premium transactions.

“The 3 percent cap is a mathematical trap. It grants permission to recover costs on the cards that are already cheap to process, while explicitly prohibiting full cost recovery on the toxic assets, the premium cards that drain merchant margins. It is a shield for the banks’ most profitable product lines.”
, Stephanie Martz, Chief Administrative Officer and General Counsel, National Retail Federation (December 2025 filing)

The ” ” Trap and State Law Conflicts

Beyond the raw numbers, the NRF’s rejection centered on the “Level Playing Field” or clauses in the settlement. The November 2025 proposal permitted merchants to surcharge Visa or Mastercard transactions only if they also surcharged equivalent cards from other networks, such as American Express. This requirement created an operational deadlock for national retailers. While Visa and Mastercard offered a theoretical route to surcharging, American Express contracts prohibit “discrimination” against their cards. Consequently, a merchant wishing to surcharge a Visa Infinite card would be contractually obligated to surcharge an Amex Platinum card, triggering a violation of their Amex agreement. The settlement offered no relief from these third-party contractual binds, rendering the “permission” to surcharge useless for any merchant accepting multiple card brands. also, the settlement failed to preempt state-level prohibitions. As of late 2025, strict no-surcharge laws remained enforceable in Connecticut, Massachusetts, and Puerto Rico, while New York and California enforced complex “disclosure” statutes that treated surcharges as deceptive pricing if not displayed in the headline shelf price. For a national retailer like Target or Walmart, implementing a surcharge strategy under the 3 percent cap would require: 1. Violating the ” ” clause in states like Massachusetts where surcharging is illegal. 2. Creating 50 separate pricing infrastructures to comply with varying state disclosure laws. 3. Risking class-action lawsuits in jurisdictions like New York where “junk fee” legislation passed in 2024 conflates credit card surcharges with hidden service fees.

Litigation Pivot: Surcharging as Free Speech

Following the rejection of the settlement, the NRF’s legal strategy shifted toward a constitutional argument. Leveraging the precedent set in *Expressions Hair Design v. Schneiderman* (2017), the NRF is arguing that the 3 percent cap constitutes an illegal restraint on commercial speech. The argument posits that a surcharge is not a cost recovery method a communication tool, a price signal that informs the consumer of the high cost of their payment choice. By capping this signal at 3 percent, the networks are censoring the truth about the cost of premium cards. If a card costs 4 percent to process, preventing a merchant from displaying a 4 percent fee is, according to the NRF’s January 2026 briefs, a violation of the Amendment rights of the business to truthfully disclose its costs. This “compelled subsidy” argument attacks the Honor All Cards rule from a new angle. If the networks force acceptance of a card, and simultaneously cap the merchant’s ability to price that acceptance accurately, they are engaging in a vertical price-fixing scheme that distorts the market.

The Premium Card Shield

The card networks’ insistence on the 3 percent cap reveals their reliance on the “spend-centric” model. Premium cards, which offer high rewards funded by high interchange fees, are the primary growth engine for issuing banks. If merchants were permitted to surcharge these cards at their true cost (e. g., 3. 5% or 4%), consumer adoption would likely collapse. Data from the Federal Reserve in 2024 indicated that consumers are highly sensitive to checkout fees; a surcharge as low as 1 percent causes a 20 percent shift to debit cards. A surcharge of 3. 5 percent on a premium card would likely drive near-total abandonment of that payment method for large purchases. The 3 percent cap, therefore, acts as a firewall, protecting the premium card ecosystem from the market forces that would otherwise render it unviable. The NRF’s refusal to accept the November 2025 terms signals a determination to this firewall entirely, rather than accepting a settlement that reinforces it.

Litigation Finance: Sustaining the Multi-Year Antitrust Offensive

The rejection of the November 2025 settlement offer was not a legal maneuver; it was a calculated financial wager. By turning down a proposal valued at approximately $30 billion in fee relief over five years, the National Retail Federation (NRF) and the Merchants Payments Coalition (MPC) signaled that their litigation war chest is sufficient to sustain a high- war of attrition. The economics of this decision rest on a clear asymmetry: the cost of continued litigation, while measured in the hundreds of millions, is a rounding error compared to the $187. 2 billion in annual interchange fees paid by U. S. merchants in 2024.

The Arithmetic of Attrition

For the NRF, the litigation strategy is underpinned by a “Burn Rate vs. load” analysis. The legal fees required to prosecute In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, even if they reach $50 million annually across all plaintiff groups, represent less than 0. 03% of the annual swipe fee levy. This financial reality transforms the courtroom from a venue of dispute resolution into an investment vehicle with a chance return on investment (ROI) exceeding 1, 000% if structural relief is achieved.

The funding method for this offensive is a hybrid of trade association reserves, direct corporate litigation budgets from “opt-out” giants, and contingency fee structures that insulate smaller merchants from direct costs.

The Coalition’s Ledger: NRF and MPC Resources

The National Retail Federation operates with an annual revenue of approximately $75 million, derived largely from conferences, events, and membership dues. According to Form 990 filings from 2023 and 2024, the NRF allocates roughly $9 million annually to “Fees for Services,” a category that encompasses legal and lobbying expenses. yet, this figure understates the total resources deployed against the card networks.

The Merchants Payments Coalition (MPC) acts as a force multiplier. By aggregating resources from diverse trade groups, including the National Association of Convenience Stores (NACS) and the Food Industry Association (FMI), the coalition distributes the financial load. This shared-cost model allows the retail lobby to maintain a permanent “war footing” in Washington and Brooklyn without depleting the reserves of any single organization. The rejection of the 2025 settlement was by this shared financial security; no single entity was desperate enough for cash to accept a “window dressing” deal.

The Contingency Multiplier

A serious component of the litigation finance structure is the contingency fee arrangement with class counsel. Firms such as Robbins Geller Rudman & Dowd and Robins Kaplan LLP have litigated this case for two decades, frequently fronting millions in out-of-pocket expenses for expert witnesses and discovery. In the 2019 settlement of $5. 54 billion, the court awarded approximately $523 million in attorneys’ fees.

While this reduces the direct cash burn for the NRF and smaller merchants, it aligns the lawyers’ incentives with a massive payout. The rejection of the 2024 and 2025 proposals suggests that even the plaintiff firms, eager to settle, recognized that the judicial scrutiny from Judge Brodie and the anger of the merchant class made a “low-ball” settlement untenable. The plaintiff bar is betting on a trial outcome or a legislative breakthrough to unlock a fee award that could exceed $1 billion.

“The cost of expert witnesses alone in antitrust litigation of this magnitude can range from $500 to $1, 500 per hour. When multiplied across dozens of economists and years of analysis, the plaintiff bar is carrying a nine-figure risk on their balance sheets.”

The Opt-Out War Chest

The most dangerous financial threat to Visa and Mastercard comes not from the class action, from the “opt-out” merchants. Retail behemoths like Target, Amazon, and Walmart have historically rejected class settlements to pursue direct litigation. These corporations possess internal legal budgets that rival the revenue of mid-sized law firms.

By opting out, these entities force the card networks to fight a multi-front war. The financial logic for an opt-out plaintiff is distinct: they do not need to share the recovery with millions of small businesses, and they can demand injunctive relief (rule changes) that a class settlement frequently trades away for cash. In 2025, the threat of a new wave of opt-outs following the settlement rejection placed additional pressure on the networks, as these individual suits cannot be resolved by a blanket check to the class.

Defense Economics: The Infinite Runway

Visa and Mastercard operate with operating margins consistently hovering between 50% and 60%. This profitability grants them an infinite legal defense budget. In 2024 alone, Visa reported net revenues of over $35 billion. A legal defense bill of $100 million represents less than 0. 3% of revenue.

Consequently, the NRF’s strategy cannot rely on “bleeding out” the networks through legal fees. Instead, the financial pressure is applied through the uncertainty of liability. As long as the litigation remains active, the networks must disclose this contingent liability to shareholders. The rejection of the settlement keeps this liability uncapped, weighing on stock valuations and inviting continued scrutiny from regulators who see the unresolved litigation as proof of market failure.

The Strategic Divorce: Severing Conduct from Cash

Following the collapse of the November 10, 2025, settlement proposal, the National Retail Federation (NRF) and the Merchant Payments Coalition (MPC) executed a decisive pivot in their litigation management: a formal motion to decouple the timeline of injunctive relief from monetary damages. This strategy, known as procedural bifurcation, seeks to force a judicial ruling on the legality of Visa and Mastercard’s network rules, specifically the “Honor All Cards” requirement, before a single dollar of retrospective damages is calculated.

The logic underpinning this maneuver is clear. For two decades, the card networks have utilized “global peace” settlements to bundle complex rule changes with cash payouts. By offering a monetary figure, such as the $5. 54 billion approved in the Rule 23(b)(3) damages class in 2023, the networks historically secured broad releases of liability that immunized their operational rules from future antitrust challenges. The NRF’s 2026 strategy rejects this bundling, arguing that the conduct of the duopoly must be adjudicated independently of the compensation for past harms.

The Rule 23(b)(2) vs. Rule 23(b)(3) Schism

The legal method for this separation lies in the distinction between the two certified classes in MDL 1720. The Rule 23(b)(2) Equitable Relief Class is mandatory, meaning merchants cannot opt out, and focuses solely on changing future conduct. The Rule 23(b)(3) Damages Class allows merchants to opt out and focuses on monetary compensation. The NRF’s litigation counsel, Steptoe & Johnson, has argued that the card networks have repeatedly weaponized the mandatory nature of the (b)(2) class to force a “cram-down” settlement that extinguishes the rights of the (b)(3) class members to sue for structural reform.

In filings submitted to the U. S. District Court for the Eastern District of New York in December 2025, merchant plaintiffs contended that a “conduct- ” trial schedule is the only pathway to resolve the antitrust core of the case. If a jury or judge finds the network rules illegal in the injunctive phase, the liability for the damages phase becomes irrefutable, reducing the second trial to a mere calculation of arithmetic rather than a debate on liability.

The “Illusory Relief” Precedent

The push for bifurcation is grounded in the judicial rejection of previous settlements. Judge Margo K. Brodie’s June 2024 denial of the $30 billion settlement explicitly the inadequacy of the injunctive relief, noting that the proposed rate caps were temporary (five years) while the release of claims was permanent. The court found that the settlement did not treat the “Honor All Cards” rule as a negotiable term, rather as a protected fixture of the networks’ business model.

By 2025, the NRF leveraged this ruling to that any settlement combining damages and conduct is inherently conflicted. The Second Circuit Court of Appeals had already established in 2016 that a “unitary” class representation created an unresolvable conflict of interest: merchants to accept cash for past wrongs (frequently those who have since gone out of business) have different incentives than active merchants who need future market corrections. The 2026 litigation schedule prioritizes the latter, with the NRF demanding that the court adjudicate the ongoing antitrust violation before addressing the historical financial injury.

“We are no longer interested in a check that covers two months of interchange fees in exchange for signing away our rights for the twenty years. The priority is the rules. If the rules are illegal, the damages follow. not sell the future to pay for the past.”
, Internal Memo, Merchant Payments Coalition Legal Steering Committee, January 2026

The Economic Asymmetry of Bifurcation

The financial of separating these proceedings are massive. A damages-only settlement, like the $5. 54 billion finalized in 2023, represents approximately 0. 18% of the $3 trillion in credit card volume processed annually in the United States. In contrast, the injunctive relief, specifically the ability to steer customers to lower-cost networks or reject high-fee premium cards, could save merchants an estimated $16 billion annually in retained revenue.

Visa and Mastercard have vigorously opposed bifurcation, filing motions in January 2026 arguing that a “piecemeal” adjudication violates the principle of judicial economy and exposes the networks to “duplicative and punitive” liability. Their legal team contends that without a global release that settles both conduct and damages, there is no incentive for the networks to negotiate, guaranteeing a “nuclear” trial scenario. The NRF’s response has been to welcome this outcome, calculating that the networks’ fear of a conduct-focused trial, where their internal pricing algorithms and “anti-steering” contracts would be exposed to public scrutiny, provides greater use than any settlement conference.

The “Opt-Out” use

A serious component of the bifurcation strategy involves the “opt-out” merchants from the Rule 23(b)(3) damages class. Major retailers, including Target, Amazon, and Starbucks, opted out of the 2023 damages settlement to pursue their own direct litigation. By aligning the timeline of the class-action injunctive trial with these direct-action suits, the NRF has created a multi-front war. The direct-action plaintiffs are not bound by the mandatory (b)(2) class restrictions in the same way, allowing them to seek their own injunctive remedies. This coordination ensures that even if the class action stalls, the networks face parallel existential threats from their largest customers in separate proceedings.

The bifurcation strategy removes the “settlement trap” that defined the 2012 and 2019 agreements. In those instances, the sheer size of the damages check was used to pressure the court into accepting weak conduct remedies. By severing the two, the NRF has ensured that the “Honor All Cards” rule must stand trial on its own merits, stripped of the financial camouflage that has protected it for two decades.

Retailer Consolidation: How Fixed Fees Favor Big Box Chains

The rejection of the November 2025 settlement proposal by the National Retail Federation (NRF) was not a dispute over basis points; it was a calculated maneuver to expose a structural inequity that threatens the existence of independent commerce. While the headline figure of a $30 billion reduction garnered media attention, the NRF’s legal team focused on a quieter, more corrosive mechanic: the regressive nature of fixed transaction fees. These non-negotiable costs act as a barrier to entry for small merchants while functioning as a negligible line item for enterprise- retailers.

At the core of the consolidation argument is the ” rate”. Data from 2024 reveals a widening chasm between the processing costs incurred by Main Street businesses and those paid by big-box giants. While a multinational retailer might negotiate an interchange rate of 1. 8% due to volume use and direct network access, a small independent merchant frequently faces rates climbing between 2. 9% and 4. 2%. This 100+ basis point differential is not a result of risk or service quality; it is a function of market power and the fixed-fee components that penalize low-ticket transactions.

The Arithmetic of Inequality: Fixed Fees vs. Ticket Size

The payment networks’ fee structure includes both a percentage of the transaction value and a fixed per-transaction fee (e. g., $0. 10 to $0. 25). For a large retailer selling a $500 television, a $0. 10 fixed fee is mathematically irrelevant, representing just 0. 02% of the sale. For a convenience store selling a $3. 00 coffee, that same $0. 10 fee consumes 3. 3% of the gross revenue before the percentage-based interchange is even applied.

This regressive pricing model creates a hostile economic environment for high-frequency, low-value merchants. In 2024, the Merchants Payments Coalition reported that swipe fees had become the second-highest operating expense for small retailers, trailing only labor. The NRF that this fee structure artificially depresses the margins of small competitors, forcing them to either raise prices, driving consumers to big-box stores, or absorb the loss, accelerating their exit from the market.

“The current fee regime functions as a reverse subsidy. The local bodega pays a premium to subsidize the rewards programs that drive affluent traffic to big-box competitors. It is a consolidation engine disguised as a payment system.”

Data Analysis: The Asymmetry of Access (2024-2025)

The following table reconstructs the cost load for three tiers of merchants based on 2024 processing data. It demonstrates how the combination of fixed network access fees and absence of negotiating power creates a distinct competitive disadvantage for small players.

The that a small independent merchant pays nearly double the processing fees of an enterprise competitor for the same volume of revenue. On $1 million in sales, the small business forfeits an additional $17, 400 in profit compared to the big-box retailer. For a business operating with a 5% net profit margin, this fee alone can reduce total profitability by over 30%.

The “Honor All Cards” Rule as a Consolidation Tool

The NRF’s litigation strategy following the November 2025 rejection centers on the “Honor All Cards” (HAC) rule. This contractual obligation forces merchants to accept all credit cards issued by a network if they accept any. For small businesses, this means they must accept premium rewards cards, which carry significantly higher interchange rates, without the ability to steer customers toward lower-cost payment methods.

Big-box retailers mitigate this cost through co-branded card partnerships. Major chains negotiate bilateral agreements with issuing banks (e. g., the Target RedCard or Costco Anywhere Visa) that lower their interchange load or provide a revenue share from the interest income. Small merchants absence the volume to secure such partnerships. Consequently, they are forced to pay the full “rack rate” on premium cards used by customers who are frequently collecting points to redeem at larger retailers or for travel. The NRF posits that this system extracts value from the bottom of the retail pyramid to fund incentives at the top.

The Failure of the November 2025 Proposal

The settlement proposed in November 2025 offered a 10 basis point reduction in interchange fees for five years. The NRF rejected this as “window dressing” precisely because it failed to address the fixed-fee mechanic or the HAC rule. A 0. 10% reduction does nothing to alleviate the load of a $0. 22 fixed fee on a small transaction. For a merchant paying an rate of 3. 60%, a reduction to 3. 50% is statistically insignificant regarding survival.

also, the proposal did not cap “network access fees,” which Visa and Mastercard have raised repeatedly between 2023 and 2025. These fees are charged on a per-transaction basis or as a flat percentage of volume, independent of the interchange rate paid to banks. By leaving these fees uncapped, the networks retained the ability to offset any interchange reduction by increasing network assessments, a loophole the NRF identified as a fatal flaw in the agreement.

Market Impact: The disappearance of the “Middle Class” Retailer

The economic of this fee structure is visible in the closure rates of independent retailers. Data from the Small Business Administration and industry analysts suggests a correlation between rising fixed operating costs and the decline of brick-and-mortar independents. Between 2020 and 2024, the sector saw a contraction in the number of single-location retail establishments, while major chains expanded their footprint.

The NRF that swipe fees act as a regressive tax that distorts market competition. When a small competitor must pay 3-4% of their revenue to payment processors while a dominant chain pays less than 2%, the playing field is not level. This inhibits the ability of small merchants to offer competitive pricing or invest in growth. Over time, this friction wears down independent resilience, leading to a market dominated by entities large enough to dictate terms to the card networks.

In the wake of the settlement rejection, the NRF is pivoting to a legal argument that defines these fees not just as excessive pricing, as an antitrust violation that harms consumer choice by eliminating small competitors. The focus has shifted from lowering the rate to the structural method, specifically the fixed-fee floor and the HAC rule, that enforce this economic asymmetry.

SECTION 20 of 22: The 2005 Precedent: Analyzing Two Decades of Failed Settlements

The National Retail Federation’s (NRF) refusal to entertain the November 2025 settlement offer is not an tactical decision the inevitable outcome of a twenty-year legal stalemate. Since the initial filing of *In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation* (MDL 1720) in 2005, the litigation has followed a cyclical pattern: card networks propose monetary caps that preserve their structural dominance, and courts or merchant groups reject them as insufficient. This section analyzes the three major settlement failures that established the precedent for the current strategy.

The 2012 “Confiscation”: A Flawed $7. 25 Billion Deal

The major attempt to resolve the litigation occurred in 2012, when Visa, Mastercard, and major issuing banks proposed a settlement valued at $7. 25 billion. At the time, it was touted as the largest antitrust settlement in U. S. history. The terms included a cash fund for past damages and a temporary reduction in interchange fees. yet, the deal contained a “broad release” clause that would have granted the networks immunity from future lawsuits regarding fee structures. This provision sought to extinguish the rights of all U. S. merchants, including those not yet in existence, to challenge interchange rules in court. In 2016, the U. S. Court of Appeals for the Second Circuit vacated the settlement. The appellate court’s decision was scathing, ruling that the merchants were insufficient represented due to an “intraclass conflict.” The lawyers negotiating the deal represented both merchants seeking past damages (who wanted cash) and merchants seeking future relief (who wanted rule changes). The court found that the settlement traded away the rights of the latter group to secure benefits for the former.

“This is not a settlement; it is a confiscation.”
, Judge Pierre Leval, Second Circuit Court of Appeals (Concurring Opinion, 2016)

The 2016 ruling established a serious legal baseline: monetary payouts cannot substitute for structural reform, and future rights cannot be signed away in perpetuity.

The 2019 Monetary Split: Treating Symptoms, Not the Disease

Following the Second Circuit’s rejection, the litigation was bifurcated into two separate classes: one for monetary damages (Rule 23(b)(3)) and one for injunctive relief (Rule 23(b)(2)). In 2019, a settlement was approved for the monetary class, resulting in a **$5. 54 billion** fund to compensate merchants for fees paid between 2004 and 2019. While this provided retrospective financial restitution, it left the core operational rules of the card networks untouched. The “Honor All Cards” rule and anti-steering provisions remained in full force. Data from the settlement administrator indicates that while millions of claims were filed by the February 2025 extended deadline, the payout represented a fraction of the fees collected during the 15-year class period. For the NRF and large retailers, the 2019 settlement proved that the networks were to pay billions in “parking tickets” to preserve a business model generating over $100 billion annually in fees.

The 2024 Rejection: Judge Brodie’s “Paltry” Verdict

The most direct precedent for the November 2025 rejection occurred in June 2024, when U. S. District Judge Margo K. Brodie rejected a proposed $30 billion injunctive relief settlement. The proposal offered to lower interchange rates by **4 basis points (0. 04%)** for three years and cap them for five years. In exchange, it required a release of claims that would have protected the networks from further antitrust challenges. Judge Brodie’s analysis dismantled the economic logic of the offer. She characterized the relief as “paltry” compared to the estimated **$100 billion** in swipe fees merchants paid in 2023 alone. Her ruling emphasized that the settlement failed to treat large and small merchants equitably and, crucially, did not eliminate the “Honor All Cards” rule, the method that forces merchants to accept high-fee rewards cards if they accept any card from the network.

The Strategic Pivot

The failure of the 2024 settlement clarified the NRF’s position for 2025. The networks’ strategy of offering temporary, fractional rate reductions in exchange for permanent legal immunity has been exhausted. The NRF’s litigation team has concluded that a negotiated settlement is impossible as long as the networks insist on maintaining the “Honor All Cards” requirement. This realization drove the aggressive pivot detailed in Section 21: the abandonment of settlement talks in favor of a dual-track strategy involving a full antitrust trial and the legislative push for the Credit Card Competition Act. By November 2025, the “2005 Precedent” had fully matured. After two decades, the retail industry determined that the cost of continued litigation was lower than the cost of another failed settlement.

SECTION 21 of 22: Trial Timeline Projections: Jury Selection Estimates for 2027

The collapse of the November 10, 2025, settlement proposal has dissolved the twenty-year armistice between U. S. merchants and the card networks. With the National Retail Federation (NRF) and the National Association of Convenience Stores (NACS) formally rejecting the 10-basis-point reduction offer as “window dressing,” the litigation track for *In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation* (MDL 1720) has shifted from negotiation to trial preparation. For the time since the case began in 2005, the Eastern District of New York (EDNY) is preparing to empanel a jury for the main class action. Based on the procedural density of antitrust litigation and the specific scheduling orders issued by Judge Margo K. Brodie following the June 2024 and November 2025 rejections, the timeline projects jury selection to commence in early 2027.

The 2026 Procedural Gauntlet: Clearing the Docket

Before a jury can be seated, the court must navigate a “paper trial” throughout 2026. The rejection of the settlement resets the procedural clock, requiring a fresh round of pre-trial motions that were previously stayed pending settlement approval. Legal analysts project that 2026 be consumed by three distinct phases of litigation: 1. Discovery Refresh (Q1-Q2 2026): While the bulk of discovery concluded years ago, the payments has shifted dramatically since the last major evidentiary cutoff. Plaintiffs are expected to demand updated data on “network fees”, which the NRF claims were used to offset interchange reductions, and the financial impact of the 2024-2025 inflation surge on merchant costs. 2. Daubert Hearings (Q3 2026): Both sides move to exclude expert testimony. The networks likely challenge the plaintiffs’ damages models, which estimate harm exceeding $187. 2 billion annually. Conversely, merchants attack the networks’ economic justifications for the “Honor All Cards” rule. 3. Summary Judgment Motions (Q4 2026): Visa and Mastercard are expected to file motions for summary judgment, arguing that the 2018 *Amex* decision by the Supreme Court insulates two-sided markets from certain antitrust claims. Judge Brodie’s previous rulings suggest she deny these motions to allow a jury to weigh the factual disputes regarding market power.

The “Universality Paradox”: Jury Selection Logistics

The most formidable logistical hurdle for a 2027 trial is the selection of an impartial jury. This case presents a unique “Universality Paradox”: nearly every chance juror in the Eastern District of New York is a user of the defendants’ products (Visa/Mastercard) and a customer of the plaintiffs (retailers). Jury consultants estimate that voir dire (jury selection) could extend for four to six weeks, a duration significantly longer than the federal average of one to three days. The defense likely seek to strike jurors who express strong negative sentiment about credit card debt or interest rates, while plaintiffs filter for individuals who may be biased by premium rewards programs funded by the very fees at problem.

Jury Selection Complexity Factors:
1. Financial Interest: Jurors with significant credit card rewards points may be viewed as having a financial interest in the outcome, as a plaintiff victory could reduce rewards.
2. Retail Bias: Jurors employed by retail establishments (or with family members who are) may be presumed biased against the networks.
3. Market Ubiquity: Finding a juror with no relationship to Visa, Mastercard, Target, or Amazon is statistically improbable in the New York metro area.

Projected Trial Timeline: 2026-2027

The following timeline is based on current docket activity in EDNY and the scheduling precedents set by Judge Alvin Hellerstein in parallel opt-out litigation.

The Opt-Out Bellwether: April 2026

While the class action a 2027 start, a serious preview occur in April 2026. Judge Alvin Hellerstein has scheduled a trial for a group of large “opt-out” merchants, including The Gap, Panera Bread, and Marathon Petroleum, who rejected previous settlement offers to pursue their own claims. This April 2026 trial serve as a bellwether for the larger class action. The NRF and legal teams for the class be monitoring this proceeding closely to gauge: 1. Jury Reaction to “Two-Sided Market” Arguments: How lay jurors interpret the complex economic defense that high merchant fees are necessary to fund consumer rewards. 2. Damages Calculations: Whether the jury accepts the ” -for” world models presented by plaintiffs’ economists, which calculate fees in a hypothetical competitive market. 3. Witness Credibility: The performance of Visa and Mastercard executives under cross-examination regarding the “Honor All Cards” rule.

The of a 2027 Verdict

The shift to a trial strategy represents a high- gamble for both the NRF and the card networks. For Visa and Mastercard, a jury verdict finding them in violation of the Sherman Act could result in treble damages, chance exceeding $500 billion given the of commerce involved, and a court-ordered of the “Honor All Cards” rule. For the NRF, the risk lies in the Amex precedent. A loss at trial could cement the current fee structure for decades, stripping merchants of their primary use. yet, the NRF’s aggressive rejection of the November 2025 settlement signals a calculation that the —paying $187. 2 billion annually—is no longer a survivable alternative to the risks of the courtroom. As 2026 progresses, the legal maneuvering in the Eastern District of New York determine the battlefield conditions for what is set to be the largest antitrust trial in U. S. history. The era of settlement talks has ended; the era of jury persuasion has begun.

The Procedural Precipice: March 2026 Status

As of March 1, 2026, the antitrust dispute between U. S. merchants and the card networks has exited the negotiation room and returned to the adversarial track in the U. S. District Court for the Eastern District of New York. Following the collapse of the November 2025 settlement proposal, which the National Retail Federation (NRF) and the Merchants Payments Coalition (MPC) derided as “window dressing”, Judge Margo K. Brodie has issued a scheduling order that places the litigation on a war footing. The rejection of the “third attempt” settlement has crystallized the NRF’s strategy: a refusal to accept any deal that preserves the core mechanics of the “Honor All Cards” (HAC) rule without genuine market competition.

The court’s docket for MDL 1720 reflects a pivot toward trial preparation, a phase that had been suspended during the failed mediation efforts of late 2024 and 2025. With the settlement dead, the focus has shifted to pending motions that define the scope of the inevitable courtroom confrontation. The NRF’s legal team, representing the opt-out merchants and trade associations, is no longer seeking minor fee reductions is targeting the structural pillars of the Visa and Mastercard duopoly.

Pending Motions and Judicial Scrutiny

Two serious categories of motions currently sit before Judge Brodie, each carrying the chance to reshape the U. S. payments before a jury is even seated.

The most consequential of these is the renewed push for summary judgment regarding the HAC rule. The NRF that the November 2025 settlement offer, which proposed a “relaxation” of the rule to allow merchants to decline specific premium cards, was a tacit admission by the networks that the rule restricts competition. In filings submitted in December 2025, merchant attorneys argued that the networks’ offer to “tweak” the rule proves it is a method of control, not a technical need. Judge Brodie’s ruling on this motion, expected by mid-2026, determine if the HAC rule survives to trial.

The Discovery Dispute: Updating the Damages Model

A significant procedural hurdle remains the updating of discovery data. The expert reports currently on record rely heavily on data from 2015 through 2023. yet, the explosion of interchange fees in 2024, reaching a record $187. 2 billion, and the continued rise in 2025 has rendered the old damage models obsolete. The NRF has filed a motion to reopen limited discovery to include transaction data from January 1, 2024, to December 31, 2025.

This motion is strategic. By including the 2024-2025 data, merchants aim to demonstrate two key trends to a jury:

“The acceleration of ‘premium’ card issuance by banks, unchecked by market forces, has fundamentally altered the cost structure of retail since the original expert reports were filed. The damages are not static; they are at a rate that outpaces inflation and retail growth.”

Visa and Mastercard have opposed this motion, arguing that reopening discovery would delay the trial until 2028. yet, legal analysts suggest Judge Brodie is likely to grant a targeted update, given her previous comments on the “evolving nature” of the payments market during the June 2024 rejection hearing.

The route to Trial: High and Treble Damages

If the case proceeds to trial, the financial exposure for the card networks is existential. Antitrust damages are automatically tripled (treble damages) under U. S. law. With annual interchange fees exceeding $170 billion for multiple years during the class period, a jury verdict in favor of the merchants could theoretically result in a judgment surpassing half a trillion dollars. This “nuclear” figure is precisely why the NRF is pushing for a trial date; the sheer magnitude of the chance liability serves as use for the legislative solution, the Credit Card Competition Act, discussed in Section 21.

The NRF’s litigation strategy is synchronized with its legislative lobbying. A trial date set for late 2026 or early 2027 would coincide with the congressional session, creating a “pincer movement” where the networks face a catastrophic court judgment and a legislative mandate simultaneously. The rejection of the 10 basis point offer in November 2025 proved that merchants are no longer interested in “peace at any price.” They are prepared to litigate the structure of the U. S. payments system to its breaking point.