Jonathan Stempel
NEW YORK (Reuters) – A federal judge said Visa and MasterCard would likely be able to survive a “significantly higher” settlement than the $30 billion settlement rejected this week with retailers who claim they overpaid fees for card transactions.
U.S. District Judge Margo Brody in Brooklyn offered her assessment in an 88-page opinion released Friday, three days after announcing she was rejecting the tentative settlement.
The agreement, which covers more than 12 million merchants, will lower and cap the swipe fees (also known as interchange fees) that merchants pay to process Visa and Mastercard transactions.
But the judge said the estimated $6 billion in annual savings to merchants is “insignificant” compared with the estimated $100 billion in fees that merchants will pay in 2023 to accept Visa and MasterCard.
“Absent evidence regarding Visa and MasterCard’s profitability, the Court cannot determine with certainty that Defendants can withstand a larger judgment. However, the evidence strongly suggests that Defendants can withstand a significantly larger judgment,” Judge Brody wrote.
The antitrust lawsuit began in 2005 and could proceed to trial unless a new settlement is reached.
Visa said it was disappointed and still believes “the best approach is to resolve the issue directly with the merchant.”
Mastercard also expressed disappointment, saying the settlement was supposed to promote competition and give millions of businesses “greater certainty and greater value in how they manage their card-acceptance operations.”
The agreement would cut the usual 1.5 to 3.5 percent card-swipe fees by 0.04 percentage points over three years, cap the fees for five years and give retailers leeway to charge extra fees.
Brodie said the proposed changes would not result in the “best possible” recovery.
He said the fees are significantly higher than they would have been if there hadn’t been any alleged antitrust violations, and that the company is “imposing” “universal card acceptance” rules that require merchants to either accept all Visa and MasterCard cards or none at all.
Many merchants opposed the settlement, as did several trade groups, including the National Retail Federation.
The case is In re Payment Card Interchange Fees and Merchant Discounts Antitrust Litigation, in U.S. District Court, Eastern District of New York, No. 05-md-01720.
(Reporting by Jonathan Stempel in New York; Editing by Daniel Wallis)
