Visa, MasterCard Settle U.S. Antitrust Case; AmEx to Fight Suit

Credit cardsVisa and MasterCard have agreed to allow merchants to encourage customers to use lower cost credit or debit cards — and potentially provide rebates or discounts for doing so — under a settlement with the U.S. Justice Department announced today.
Simultaneously, Justice officials said that an antitrust lawsuit would proceed against a third payment network, American Express, challenging rules that prevent merchants from offering consumers “any cost saving options, such as discounts or rewards, for using less expensive forms of payment.”
Visa, MasterCard and American Express impose fees on merchants for the right to accept their branded cards. In 2009, the three networks and affiliate banks collected more than $35 billion in fees.
In a strongly-worded statement of its own, America Express painted the Justice Department’s action as a departure from previous U.S. efforts to promote competition in the card payments industry.
American Express said the action would “interfere with consumer choice at the check-out counter by steering American Express card members to another payment network.”
AmEx Chairman and CEO Kenneth I. Chenault said the “extraordinary retreat” by U.S. antitrust officials would stifle competition.
“We have no intention of settling the case,” Chenault said. “We will defend the rights of our card members at the point of sale and our own ability to negotiate freely with merchants. We are confident that the courts will recognize the perverse anti-competitive nature of the government’s case and that we will continue providing a competitive, superior service to card members and merchants.”
The two largest card payment networks, Visa and MasterCard, opted to settle in what U.S. Attorney General Eric Holder said was a victory for consumers who will now have greater options, and potentially enjoy cost savings as a result.
Holder said the restrictive rules imposed by Visa, MasterCard and American Express “prevent price competition among credit card networks, which means merchants face increased business costs and consumers pay higher prices.”
“With today’s lawsuit we are sending a clear message,” Holder said. “We will not tolerate anticompetitive practices. We want to put more money in consumers’ pockets, and by eliminating credit card companies’ anticompetitive rules, we will accomplish that.”
Holder said consumers could use a preferred, lower-cost credit card, or ones offering rewards, and merchants could provide the customer with a rebate for using that card, under the Visa and MasterCard settlement.
“Merchants will also be able to inform consumers which cards will lower business costs the most, allowing these savings to be passed on to consumers,” Holder said.

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