By Jonathan Stempel
NEW YORK (Reuters) – A federal judge said on Tuesday that Visa Inc and Mastercard Inc could likely afford a “significantly larger” settlement with merchants who said they overpaid for card swiping fees than the $30 billion deal she 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 involving more than 12 million merchants would have lowered and capd the swipe fees, also known as interchange fees, they pay to handle Visa and MasterCard transactions.
But the judge described the estimated $6 billion in annual savings for merchants as “paltry” compared to the estimated $100 billion in fees they pay 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 could 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 “great certainty and 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.
The proposed changes fall short of “the best possible recovery,” Brody said.
It said the order kept fees well above what they would be in the absence of the alleged antitrust violations, and still “burdened” merchants with a “honor all cards” rule that required them to accept all Visa and Mastercard cards, or none.
Many retailers objected to the settlement, as did several trade groups including the National Retail Federation.
The case is Antitrust Litigation Concerning Payment and Debit Card Interchange Fees, U.S. District Court, Eastern District of New York, No. 05-md-01720.