The settlement, which was reached in March, aimed to lower and cap the fees charged by Visa and Mastercard, allowing small businesses to collectively bargain for rates.

However, the settlement faced opposition from the National Retail Federation, the largest U.S. retail trade group, who believed that the relief offered was only temporary and that payment processing fees remained excessively high. One of the main points of contention was the five-year cap on swipe fees, which many merchants felt was inadequate.

Judge Margo Brodie of the Eastern District of New York, in a brief order, announced that she was unlikely to grant final approval to the settlement. This decision implies that the case may proceed to trial if no alternative resolution is reached.

The settlement stems from a 2005 lawsuit that accused Visa, Mastercard, and their member banks of implementing excessive fees for merchants accepting their credit cards, thereby violating antitrust laws. Both Visa and Mastercard collect fees from every transaction made on their network, typically ranging between 1% and 3% of the transaction value, depending on the size and industry of the merchant.

In 2018, Visa and Mastercard agreed to pay a substantial $6.2 billion as part of the long-running lawsuit filed by a group of 19 merchants. However, there were two unresolved components to the lawsuit - the dispute over the acceptance rules imposed by Visa and Mastercard and the participation of merchants who chose not to be part of the initial settlement.

With the judge signaling hesitations towards approving the proposed settlement, all parties involved may need to reconsider their positions. The case could potentially go to trial, further extending the legal battle between merchants and the payment processing giants.

It remains to be seen how this development will impact the ongoing efforts to ensure fair and reasonable swipe fees for merchants, as well as the broader landscape of the payment processing industry.