((Automated translation by Reuters, please see disclaimer https://bit.ly/rtrsauto)) by Jonathan Stempel
A federal judge said Visa VN and Mastercard MA.N can likely afford a “substantially larger” settlement with merchants who said they overpaid on transaction fees than the $30 billion deal she rejected this week.
Brooklyn District Judge Margo Brodie made the assessment in an 88-page opinion released Friday, three days after announcing her rejection of the preliminary agreement.
The deal, which affects more than 12 million merchants, would have reduced and capped transaction fees, also known as interchange fees, that they pay to process Visa and Mastercard transactions.
But the judge called the estimated $6 billion in annual savings for merchants “paltry,” compared to the estimated $100 billion in fees they will pay to accept Visa and Mastercard in 2023.
“Without evidence of Visa and Mastercard’s profitability, the court cannot say with certainty that defendants can withstand a larger judgment; however, the evidence strongly suggests that they could withstand a substantially larger judgment,” Mr. Brodie wrote.
The competition dispute began in 2005 and could go to trial in the absence of a new agreement.
Visa said it was disappointed and continues to believe that “a direct resolution with merchants is the best way forward.”
Mastercard also expressed disappointment, saying the deal would have encouraged competition and given millions of businesses “substantial certainty and enormous value in how they run their card acceptance businesses.”
The deal would have lowered user fees from 1.5% to 3.5% by 0.04 percentage points over three years, capped fees for five years and given merchants more leeway to impose additional charges.
Ms Brodie said the proposed changes fell short of “the best possible recovery”.
According to her, fees remain significantly higher than they would be in the absence of the alleged competition law violations and merchants are still “burdened” by the “Honor All Cards” rule, which requires them to accept all cards Visa and Mastercard, or to accept none.
Many retailers opposed the regulation, as did several trade groups, including the National Retail Federation.
L’affaire est In re Payment Card Interchange Fee and Merchant
Discount concurrence Litigation, U.S. District Court, Eastern
District of New York, No 05-md-01720.
