Credit-Land Report: Visa/Maste/Ammex, meet Uncle Sam and Anti Trust

This past Wednesday, a settlement was reached between MasterCard, Visa and the Justice Department that will disable the networks from habitually including merchant restraint clauses in their contracts with retailers. These clauses often forbid the merchants from offering discounts to customers when they pay for their purchases using a competitor’s credit card, check, debit card, or cash.

The settlement resolves a suit filed on Oct, 4 n the U.S. District Court in Brooklyn, NY. in which the government, along with several state attorney’s general, claimed that the policies put in place by the credit networks were in violation of the anti-trust laws. Furthermore, they claimed that these rules were not in the best interest of the consumer who otherwise may be offered a wider choice of payment options as well as additional savings opportunities.

Fees paid by retailers to the networks are typically higher on cards that offer rewards programs as well as some of the higher-end credit cards with gold, platinum, and black designs. The fees paid on simpler, no rewards cards are lower and therefore more profitable to merchants. Merchants claim more savings for them translates into more savings for the consumer. The new rule also will allow merchant’s to disclose to their customers the cost of individual merchant fees.

In reaching the deal, Visa and MasterCard didn't admit or deny the allegations, according to court papers. "MasterCard is pleased that the court has approved the settlement," a spokesman for the credit-card processor said. Visa has yet to release a public statement. American express vehemently opposes the settlement, which it claims will "interfere with consumer choice at the check-out counter by steering American Express card members to another payment network." American Express fees tend to be higher than those of the other networks, and as such, they feel the ruling would prejudice retailers from offering discounts to consumers paying with their card.

The ruling could in fact be of benefit to the consumer, retailers may begin to offer discounts for purchases made with a certain type of card, but some fear that this could also lead to what would essentially be a surcharge for those who don’t carry those cards; time alone will tell. However, traditionally the consumer has always benefited from increased competition in the marketplace.

Bryant Park

Bryant Park is a financial consultant for one of the companies listed on Wall Street. He writes on a variety of topics ranging from credit cards to different loans that can be availed by consumers. He holds a bachelor degree in Financial Services from Dartmouth College.