Discover Settles Antitrust Dispute

Last week Discover Financial Services settled an antitrust suit with Visa and MasterCard for an undisclosed sum and sent the stock price up 11 percent. The dispute revolved around whether Visa and MasterCard were blocking banks from having Discover accounts. Discover had sought $18 billion, but industry sources say the settlement will yield around $3 billion. One billion of the settlement must be paid to the former parent company of Discover, Morgan Stanley.

In the complaint filed four years ago, Discover charged the defendants, Visa and MasterCard as having “engaged in a continuing combination and conspiracy to organize and operate their general purpose cards in a manner that restrains competition.”

Visa, which has a 51 percent of the credit card market and MasterCard, with 28 percent, settled disputes with American Express in the last year in a similar allegation for nearly $4 billion. Discover’s share of the market is 3.8 percent.

According to a Reuters report, “U.S. courts have ruled that efforts by Visa and MasterCard, the world’s two biggest credit card companies, to restrict banks from working with rivals was anti-competitive and broke antitrust law.”

Visa had reportedly set aside a $3 billion litigation escrow account to cover such expected settlements.

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One Response to Discover Settles Antitrust Dispute

  1. stephen.pacer says:

    Josh, this is interesting to me. I’ve worked in a few restaurants, and though I think we always accepted Discover cards, people hardly use(d) them.
    Plus, I was out to lunch the other week with a friend, and when she tried to use her Discover card, they wouldn’t accept it. I was baffled. I never really thought that it was because Visa and MasterCard were basically restraining the competition. Good to see they settled the dispute, but I wonder if it will mean more Discover cards around??

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