A federal judge on July 20 approved a settlement between the U.S. Department of Justice and Visa Inc. and MasterCard Worldwide that bars the two networks from enforcing bylaws preventing merchants steering business to less expensive forms of payment.
Visa and MasterCard announced the settlement in October (
American Express Co. has refused to settle with the government, vowing to wage a multiyear fight on the grounds that the deal would promote steering customers from one payment network to another without enhancing competition (
The agreement settles claims brought by the Justice Department in an Oct. 4 suit charging the three card networks with illegally preventing competition by limiting the kinds of discounts merchants can offer.
Under the settlement, the nation’s two largest processing networks agreed that the contracts they sign with retailers would not prohibit stores from offering customer discounts or rebates for using a specific kind of credit card, such as a rewards card. The fees the networks and banks charge retailers for handling purchases made with rewards, cash-back cards and high-end cards with gold, platinum or black designations are often higher than the fees for simpler cards with no rewards. It also says merchants may inform customers about their costs for handling different types of cards.
The lawsuit maintained the networks made it difficult for merchants to promote the use of competing cards with lower fees. Joining the lawsuit were state attorneys general from Arizona, Connecticut, Idaho, Iowa, Maryland, Michigan, Missouri, Montana, Nebraska, New Hampshire, Ohio, Rhode Island, Tennessee, Texas, Utah and Vermont.
Merchants may find it difficult to reap much benefit from the settlement, according to the Federal Reserve Bank of Boston (
