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Discover Financial Services may accept a settlement of up to $4 billion from Visa Inc. and MasterCard Inc. in a dispute over efforts to keep banks from working with rivals, according to three industry analysts.
Visa and MasterCard may have to pay as much as $18 billion if the suit fails to settle. U.S. courts have determined that restrictions the two card companies had put on banks stifled competition and violated federal antitrust law.
Discover's lawsuit against Visa and MasterCard is scheduled to go to trial Oct. 14. Attorneys for Discover will argue that Visa and MasterCard shut it out as the industry grew fivefold in 15 years. The Riverwoods, Ill., company claims damages of $6 billion, 10 times its net income for last year. Under antitrust law, any award would be tripled automatically.
Sanjay Sakhrani, an analyst at KBW Inc.'s Keefe, Bruyette & Woods Inc. in New York, and Scott Valentin, an analyst at Friedman, Billings, Ramsey Group Inc. in Arlington, Va., also predicted a settlement.
Any settlement will top $1 billion, Mr. Sakhrani said.
American Express, which sued separately, settled with MasterCard for $1.8 billion in June and with Visa and its bank partners for $2.25 billion last year.
Mr. Valentin said a settlement of about $1 billion would not enable Discover to surpass Amex in market share. "I don't think it will be a game-changing event for any of the companies."
Judge Barbara Jones of the U.S. District Court for the Southern District of New York, who is presiding over the Discover case, ordered settlement talks in April after requests from Visa and MasterCard for mediation, according to court papers. She asked for a resolution of the case by June 30.
But Jon Drummond, a Discover spokesman, wrote last week in an e-mail: "The mediation scheduled by the judge was unsuccessful in reaching a settlement, but we're stopping short of saying it is officially concluded. We continue to prepare for trial."
Neither Noah Hanft, MasterCard's general counsel, nor Denise Dunckel, a spokeswoman for Visa, would discuss the settlement talks.
Judge Jones said last month that she would instruct the jury that the Visa and MasterCard rules were illegal restraints on trade. Jurors would then decide whether Discover was harmed by the practices and by how much.
