Antitrust Division Settles With Visa and MasterCard But Continues Lawsuit Against American Express

On October 4, 2010, the Antitrust Division announced that it along with the states of Connecticut, Iowa, Maryland, Michigan, Missouri, Ohio, and Texas filed a civil antitrust lawsuit in U.S. District Court for the Eastern District of New York challenging rules that American Express, Master Card, and Visa have in place that prevent merchants from offering consumers discounts, rewards and information about card costs, ultimately resulting in consumers paying more for their purchases.
According to the complaint, American Express, MasterCard and Visa maintain rules that prohibit merchants from encouraging consumers to use lower-cost payment methods when making purchases. For example, the rules prohibit merchants from offering discounts or other incentives to consumers in order to encourage them to pay with credit cards that cost the merchant less to accept.

The Antitrust Division announced that it has entered into a settlement with Visa and MasterCard that resolves its antitrust concerns against them. The settlement would require the two companies to allow merchants to offer discounts, incentives, and information to consumers to encourage the use of payment methods that are less costly.

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; and 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.

The Antitrust Division was unable to reach a settlement agreement with American Express so 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.

With the lawsuit, the Antitrust Division is sending a clear message that it will not tolerate anticompetitive practices that harm consumers. As indicated by the Antitrust Division, these restrictive rules set by the credit card companies restrain competition among credit card networks for merchant acceptance and distort the competitive process. The Antitrust Division claims that the proposed settlement with MasterCard and Visa is an important step in bringing more credit card competition to the point of sale.

Andre Barlow
(202) 589-1834
abarlow@dbmlawgroup.com