Justice settles suit with Visa, MasterCard

AmEx vows to fight ‘anti-competitive practices’ charges

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A two-year Justice Department investigation has ended in a settlement with two of the largest U.S. credit card companies and, according to Attorney General Eric H. Holder Jr., a bonus for consumers who might find a little extra money in their pockets.

But while Visa and MasterCard reached a deal in the long-simmering battle over how the credit card companies restrict merchants’ ability to offer discounts to consumers, American Express vowed to fight a government antitrust lawsuit filed Monday in U.S. District Court in New York.

“Restrictive rules prevent price competition among credit card networks, which means merchants face increased business costs and consumers pay higher prices,” Mr. Holder said at a news conference. “With today’s lawsuit, we are sending a clear message: We will not tolerate anti-competitive practices.

“We want to put more money in consumers’ pockets, and by eliminating credit card companies’ anti-competitive rules, we will accomplish that,” he said.

The antitrust lawsuit challenged rules established by Visa, MasterCard and American Express to prevent merchants from offering consumer incentives, including cost-saving options such as discounts or rewards, for using less-expensive forms of payment or one using one brand of credit card over another.

The three companies control more than 90 percent of the U.S. credit card market, according to the site creditcard.com.

The settlement would require Visa and MasterCard to allow merchants to give discounts for cash transactions, for using other, cheaper credit card brands, or for using less-prestigious levels of their own cards.

MasterCard called the proposed settlement a “modification of a rule … which is precisely what we already permit.” A spokesman for Visa described the settlement as “amicable” and pledged to make “reasonable” changes to its policies.

A number of consumer groups on Monday applauded the antitrust lawsuit, saying it was overdue.

“The credit-card networks and their banks have gouged consumers for years,” said Ed Mierzwinski, consumer program director of the U.S. Public Interest Research Group. “After all, everyone, including cash customers, pays more at the store and more at the pump due to their non-negotiable fees and unfair rules imposed on merchants.”

Pam Banks, policy counsel for the Consumers Union, said the case will “hopefully open the market to greater competition and greater consumer benefits.”

“We welcome DOJ’s continued attention to making sure consumers are not exploited,” she said.

But in a terse public statement, American Express denied wrongdoing, and Chief Executive Officer Kenneth I. Chenault said the company has “no intention of settling the case.”

“We will defend the rights of our card members at the point of sale and our own ability to negotiate freely with merchants,” he said.

American Express spokesman Michael O’Neill said the company will contest the lawsuit and is hiring noted defense lawyer David Boies to handle its defense. The company has described the Justice Department lawsuit as “a significant retreat” from previous department efforts to promote competition in the payments industry.

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