Jonathan Stempel
NEW YORK (Reuters) – A federal judge said Visa (NYSE:) and Mastercard (NYSE:) will likely be able to withstand a “substantially larger” settlement with merchants who said they overpaid for swipe fees than a 30-year settlement billion dollars, which she rejected this week.
U.S. District Judge Margot Brody in Brooklyn gave her assessment in an 88-page opinion released Friday, three days after announcing her rejection of the preliminary settlement.
The agreement, covering more than 12 million merchants, will reduce and cap the transaction fees, also known as interchange fees, they pay to process Visa and Mastercard transactions.
But the judge called merchants’ $6 billion in annual savings “paltry” compared to the estimated $100 billion in fees they paid to accept Visa and Mastercard in 2023.
“Without evidence of the profitability of Visa and Mastercard, the court cannot say with certainty that the defendants will be able to withstand a more severe judgment; however, the evidence strongly suggests that they could have withstood a significantly harsher judgment,” Brody wrote.
The antitrust litigation began in 2005 and could go to trial if a new settlement is reached.
Visa said it was disappointed and continued to believe that “resolving the situation directly with merchants is the best path forward.”
Mastercard also expressed disappointment, saying the agreement would have encouraged competition and given millions of businesses “substantial certainty and tremendous value in how they manage their card acceptance activities.”
The agreement would have reduced the typical swipe fee from 1.5% to 3.5% by 0.04 percentage points for three years, capped the fee for five years and given merchants more flexibility to charge additional fees.
Brodie said the proposed changes did not provide the “best possible” recovery.
She said it keeps fees significantly higher than they would otherwise be due to alleged antitrust violations, and continues to “saddle” merchants with an “Accept All Cards” rule requiring them to accept all Visa and Mastercard or none were accepted.
Many retailers objected to the settlement, as did several trade groups, including the National Retail Federation.
The case involves an antitrust litigation involving payment card interchange fees and merchant rebates, U.S. District Court, Eastern District of New York, No. 05-md-01720.