.jpg)
Written by Jonathan Stemple
NEW YORK (Reuters) – A federal judge said Visa Inc and Mastercard Inc will likely hold out for a “significantly larger” settlement with merchants who said they were overcharged on swipe fees than the $30 billion agreement they rejected this week.
US District Judge Margo Brody in Brooklyn made her assessment in an 88-page opinion issued on Friday, three days after announcing her rejection of the initial settlement.
The agreement, which covers more than 12 million merchants, would have lowered and capped the swipe fees, also known as interchange fees, they pay to handle Visa and Mastercard transactions.
But the judge called the estimated $6 billion annual savings for merchants “meager” compared with 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 can withstand a larger judgment; however, the evidence strongly suggests that they can withstand a much larger judgment,” Brody wrote.
The antitrust lawsuit began in 2005 and could go to trial absent a new settlement.
Visa said it was disappointed and still believed that “a direct resolution with merchants is the best way forward.”
Mastercard also expressed disappointment, saying the settlement would have encouraged competition and given millions of businesses “significant certainty and tremendous value in how they manage their card acceptance activities.”
The agreement would have reduced the typical swipe fee of 1.5% to 3.5% by 0.04 percentage points for three years, capped the fee for five years, and given merchants more room to charge additional fees.
Brody said the proposed changes fell short of the “best possible recovery.”
It said the order kept fees well above the level they would have been absent the alleged antitrust violations, and still “burdened” merchants with the “honor all cards” rule that requires them to accept all, or none, of Visa and MasterCard.
Many merchants objected to the settlement, as did several trade groups including the National Retail Federation.
The case involves an antitrust lawsuit involving payment card interchange fees and merchant debit fees, U.S. District Court, Eastern District of New York, No. 05-md-01720.
