Visa, MasterCard Settle Antitrust Lawsuit; American Express Fights On

Seven states today joined the U.S. Department of Justice in a civil antitrust lawsuit challenging rules made by American Express, MasterCard and Visa that prevent merchants from offering consumers discounts, rewards and information about card costs, ultimately resulting in consumers paying more for their purchases.

"When you see a sign on a cash register requiring a minimum purchase or extra fee for using a credit card, it's because of the unfair practice established by these companies," Ohio Attorney General Richard Cordray said. "Merchants are charged a 'swipe fee' for each brand of credit card " but they can't tell consumers what those costs are or otherwise reward consumers for using less expensive credit cards to make a purchase. Those agreements stifle competition at the cash register. And we all know how those 'gotcha' fees add up."

The attorneys general of Connecticut, Iowa, Maryland, Michigan, Missouri, Ohio and Texas also signed onto the litigation, which was filed in the U.S. District Court for the Eastern District of New York.

Visa, MasterCard and American Express handled more than $1.6 trillion in transactions last year, Cordray said.

"Accepting credit cards costs U.S. merchants $35 billion each year. Clearly it is vital for small businesses to be able to conduct credit card transactions, but they should be able to use all the leverage they can to get the best deal for themselves and to pass the savings on to their customers."

Visa and MasterCard settled with the Department of Justice immediately after the complaint was filed. If approved by the court, the two companies will be required to allow merchants to offer discounts, incentives and information to consumers to encourage the use of payment methods that are less costly.

"With today's lawsuit, we are sending a clear message: We will not tolerate anticompetitive practices," said U.S. Attorney General Eric Holder. "We want to put more money in consumers' pockets, and by eliminating credit card companies' anticompetitive rules, we will accomplish that."

The proposed settlement requires MasterCard and Visa to allow their merchants to:

· Offer consumers an immediate discount or rebate or a free or discounted product or service for using a particular credit card network, low-cost card within that network or other form of payment.
· Express a preference for the use of a particular credit card network, low-cost card within that network or other form of payment.
· Promote a particular credit card network, low-cost card within that network or other form of payment through posted information or other communications to consumers.
· Communicate to consumers the cost incurred by the merchant when a consumer uses a particular credit card network, type of card within that network or other form of payment.

The proposed settlement allows any merchant that only accepts Visa and MasterCard to take advantage of the relief immediately.

Amex case continues

The ongoing litigation against American Express seeks to allow merchants that accept American Express to engage in the same kind of discounting and encouragement that the proposed settlement with MasterCard and Visa allows. Until American Express's restraints on merchants are lifted, the many merchants that accept American Express, as well as Visa and MasterCard, will not be able to take full advantage of their new options under the proposed settlement, according to the Justice Department.

American Express Company, the parent of American Express Travel Related Services Company Inc., is a New York corporation, with its principal place of business in New York City. Cardholders used American Express credit and charge cards for $419.8 billion in purchases in 2009. MasterCard is a Delaware corporation with its principal place of business in Purchase, New York. Cardholders used MasterCard credit and charge cards for $476.9 billion in purchases in 2009. Visa is a Delaware corporation with its principal place of business in San Francisco. Cardholders used Visa credit and charge cards for $764.2 billion in purchases in 2009.