Credit-Card Issuers in Breakthrough Settlement

WASHINGTON — The Department of Justice said Monday that Visa and MasterCard have agreed to a proposed settlement of a civil antitrust action against them that will allow merchants to begin steering customers toward lower-cost methods of payment, marking a major victory for retail groups.

WASHINGTON — The Department of Justice said Monday that Visa and MasterCard have agreed to a proposed settlement of a civil antitrust action against them that will allow merchants to begin steering customers toward lower-cost methods of payment, marking a major victory for retail groups.

“This is a monumental development for supermarket retailers and, most importantly, their customers,” said Leslie G. Sarasin [4], president and chief executive officer, Food Marketing Institute, in a prepared statement. “Supermarkets have been prevented by credit-card companies from accepting less expensive forms of plastic — ones that do not require the merchant to pay excessive fees just for the privilege of accepting a particular card, thus essentially preventing competition.”

In an interview with SN, Jennifer Hatcher, FMI's senior vice president of government and public affairs, noted that the settlement will give the DOJ ongoing jurisdiction over any new rules or restrictions that the card companies may propose.

“This will allow retailers to steer customers to lower-cost cards within a brand,” she added, noting that the financial reform bill, which included some similar restrictions for debit-card issues, did not address competition within card brands.

"Grocers from across the country are pleased that the Department of Justice has joined in the fight to free merchants from these anticompetitive rules and policies that restrict competition and harm consumers and merchants," said Peter Larkin [5], president and CEO, National Grocers Association.

The DOJ action against the card companies was joined by state attorneys generals from Connecticut, Iowa, Maryland, Michigan, Missouri, Ohio and Texas. The DOJ said the credit-card companies imposed restraints on merchants are directly aimed at restraining horizontal interbrand competition.

The DOJ’s proposed settlement is with Visa and MasterCard only. It will continue to litigate against American Express.

“These restrictive rules prevent price competition among credit-card networks, which means merchants face increased business costs and consumers pay higher prices,” said U.S. Attorney General Eric Holder in announcing the litigation and proposed settlement. “With today’s lawsuit we are sending a clear message: 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.”