In a stunning move this week, and shortly before the start of the trial
for the Wal-Mart debit card antitrust lawsuit against VISA and MasterCard,
U.S. District Judge John Gleeson announced that a settlement had been
reached between MasterCard and the merchant plaintiffs. Under terms of the
deal, MasterCard has agreed to pay the equivalent of $1 billion in damages,
cut fees for off-line debit card transactions, and make concessions over
the "Honor All Cards" policy. The surprise settlement delayed opening
arguments in the trial for VISA. The implications for VISA, who controls
the off-line or signature debit card market, is unclear. MasterCard asked
the court on March 14th to sever the plaintiffs' claims against MasterCard
saying it would be prejudicial and could cause substantial jury confusion.
The motion was previously denied. MasterCard currently has a 23% share of
the off-line debit card market. The class action lawsuit, representing five
million merchants in the USA, was filed in 1996 by Wal-Mart, The Limited,
Sears Roebuck, Safeway, Circuit City, and three trade associations. The
lawsuit charges the card associations with violating U.S. antitrust law by
monopolistic and uncompetitive business practices concerning debit cards.
The merchants also claim that VISA and MasterCard and their member banks
have forced merchants to accept their off-line signature debit card
transactions under their "Honor All Cards" rule at rates five to ten times
higher than on-line PIN debit card transactions. VISA and MasterCard say
that despite several favorable rulings for the plaintiffs in Judge
Gleeson's April 1st Summary Judgment proceeding, the merchants have yet to
prove there was any harm to competition and consumers from the "Honor All
Cards" rule. The card associations point to the fact that PIN debit card
transactions are growing faster than off-line debit and that their
competitors control more than two-thirds of the PIN-based debit market.
VISA and MasterCard also say that if the merchants prevail, the benefits of
universal acceptance will be undermined and consumers will suffer by being
denied their right to choose their preferred method of payment. MasterCard
noted that its online debit mark, "Maestro," is currently the least
expensive online debit alternative.
In a stunning move this week, and shortly before the start of the trial
for the Wal-Mart debit card antitrust lawsuit against VISA and MasterCard,
U.S. District Judge John Gleeson announced that a settlement had been
reached between MasterCard and the merchant plaintiffs. Under terms of the
deal, MasterCard has agreed to pay the equivalent of $1 billion in damages,
cut fees for off-line debit card transactions, and make concessions over
the "Honor All Cards" policy. The surprise settlement delayed opening
arguments in the trial for VISA. The implications for VISA, who controls
the off-line or signature debit card market, is unclear. MasterCard asked
the court on March 14th to sever the plaintiffs' claims against MasterCard
saying it would be prejudicial and could cause substantial jury confusion.
The motion was previously denied. MasterCard currently has a 23% share of
the off-line debit card market. The class action lawsuit, representing five
million merchants in the USA, was filed in 1996 by Wal-Mart, The Limited,
Sears Roebuck, Safeway, Circuit City, and three trade associations. The
lawsuit charges the card associations with violating U.S. antitrust law by
monopolistic and uncompetitive business practices concerning debit cards.
The merchants also claim that VISA and MasterCard and their member banks
have forced merchants to accept their off-line signature debit card
transactions under their "Honor All Cards" rule at rates five to ten times
higher than on-line PIN debit card transactions. VISA and MasterCard say
that despite several favorable rulings for the plaintiffs in Judge
Gleeson's April 1st Summary Judgment proceeding, the merchants have yet to
prove there was any harm to competition and consumers from the "Honor All
Cards" rule. The card associations point to the fact that PIN debit card
transactions are growing faster than off-line debit and that their
competitors control more than two-thirds of the PIN-based debit market.
VISA and MasterCard also say that if the merchants prevail, the benefits of
universal acceptance will be undermined and consumers will suffer by being
denied their right to choose their preferred method of payment. MasterCard
noted that its online debit mark, "Maestro," is currently the least
expensive online debit alternative.