A federal judge stated on Friday that Visa and Mastercard could likely handle a settlement “substantially greater” than the proposed $30 billion settlement with merchants, which she rejected last week.
U.S. District Judge Margo Brodie of the Eastern District of New York made this assessment in an 88-page opinion, released just three days after she rejected the preliminary $30 billion settlement.
The settlement aimed to lower and cap interchange fees, or swipe fees, paid by over 12 million merchants for Visa and Mastercard transactions.
Judge Brodie described the estimated $6 billion in annual savings for merchants as “paltry” compared to the estimated $100 billion in fees paid to Visa and Mastercard in 2023.
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“Without evidence of Visa’s and Mastercard’s profitability, the court cannot say with certainty that defendants can withstand a greater judgment; however, the evidence strongly suggests that they could withstand a substantially greater judgment,” Brodie wrote.
The antitrust litigation over swipe fees, which began in 2005, could go to trial if the card issuers and merchants fail to agree on a new settlement that meets the judge’s approval.
“While we are disappointed with the judge’s decision, we continue to believe that direct resolution with merchants is the best way forward and are evaluating all options as the case proceeds,” Visa told FOX Business in a statement.
“The U.S. payments ecosystem is the most advanced in the world, and our focus is on maintaining the security, innovation, rewards, and access to credit that are critical to American consumers and small businesses that power our economy,” Visa added.
Mastercard did not immediately respond to a request for comment.
Following the ruling, Mastercard previously expressed disappointment, stating that the settlement would have encouraged competition and provided significant value to businesses in managing their card acceptance activities.
Under the rejected settlement terms, card issuers would have reduced the typical 1.5% to 3.5% swipe fee by 0.04 percentage points for three years, capped fees for five years, and given merchants more leeway to impose surcharges.
Brodie argued that the proposed changes fell short of the “best possible” recovery as they kept fees significantly higher than they would be without the alleged antitrust violations and still required merchants to comply with the “Honor All Cards” rule, obligating them to accept all Visa and Mastercard cards or none.
Many merchants, as well as trade groups like the National Retail Federation, opposed the settlement.
