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.