A federal judge suggests Visa and Mastercard can afford a higher settlement

U.S. District Judge Margo Brodie in Brooklyn rejected a tentative $30 billion settlement between Visa Inc. (VN) and Mastercard Inc. (MA.N) and sellers who claimed they were overcharged for swiping. Judge Brodie’s decision, detailed in an 88-page opinion released Friday, suggests Visa and Mastercard could likely withstand a much larger settlement than proposed.

Rejected agreement, announced three days before Brodie’s opinion was published, aimed to address the concerns of more than 12 million merchants by lowering and capping the online fees — commonly known as swipe fees — they pay to process transactions. But the judge criticized the proposed settlement, saying the estimated $6 billion in annual savings to merchants fell short of the $100 billion in fees they would pay in 2023 to accept Visa and Mastercard payments.

“Without evidence of the viability of Visa and Mastercard, the court cannot conclude with certainty that the defendants will withstand a more severe sentence; however, the evidence strongly suggests that they could withstand a much more severe sentence,” Judge Brodie wrote, emphasizing the need for a more substantive decision.

Related: Judge Throws Out $30 Billion Visa and Mastercard Swipe Fee Deal

The antitrust case, which began in 2005, could go to court if no new agreement is reached. In this long-running case, merchants and card issuers clashed over fees charged for processing credit and debit card transactions.

Both Visa and Mastercard expressed disappointment with the judge’s decision. Visa reiterated its belief that the best solution was to resolve the issue directly with merchants, while Mastercard noted that the settlement would promote competition and provide millions of businesses with “significant certainty and tremendous value in managing their card acceptance activities.”

Source: Reuters