Mastercard settles debit card suit

The future of the debit card business is at stake

The debit and credit card company Mastercard has reached an 11th-hour settlement in a multi-billion dollar lawsuit alleging it abused its market power.

Mastercard International settled with Wal-Mart stores and thousands of other retailers outside of the courts in New York on Monday - just before the trial was due to begin.

The surprise announcement by US District judge John Gleeson now leaves the credit card company Visa USA as the sole defendant in the case.

Mr Gleeson did not give any details of the settlement but said: "The case is settled as to Mastercard."

Four million retailers, led by Wal-mart, were seeking damages of tens of billions of dollars from Visa and Mastercard.

Abuse of market power

Although the trial was scheduled to open on Monday afternoon, Mr Gleeson granted Visa's request that proceedings be postponed until Wednesday because of the Mastercard settlement.

Visa and Mastercard were accused of abusing their market power and charging retailers up to 10 times more than smaller competitors to process payments.

The lawsuit also challenged Visa and Mastercard's rule that all retailers who accept any of their cards must accept all of them.

The trial has been seven years in the making, and has been deliberately delayed according to Lloyd Constantine, the lead attorney for the retailers.

"Visa and Mastercard are wonderful at delaying justice," Mr Constantine told BBC Radio 4's Today programme.

"This case should have been tried a few years ago. They can run but they can't hide for ever," he added.

Free choice?

Visa and Mastercard had argued that customers would be the losers if the retailers got their way, saying the current system "protects and preserves consumer choice".

Experts said the outcome of the trial could have a dramatic impact on the future of the debit card market.

"This case isn't merely about money, it's about the future of the Visa and Mastercard debit business," said Washington-based antitrust lawyer Bruce Sokler.

Any settlement is likely to require stores to be compensated for the costs paid over the past 11 years, according to Mr Constantine.

Visa and Mastercard are associations of banks, and some analysts predict the banks may be forced to share the costs in the event of a massive damage verdict.