Justice Department Settles With MasterCard and Visa on Credit-Card Acceptance Rules

On Monday, October 4, Attorney General Eric Holder announced that the U.S. Department of Justice had a "reached a proposed settlement" with MasterCard and Visa regarding rules that prevent retailers from providing discounts to consumers for using credit cards with less costly "swipe fees" or less expensive forms of payment. The news came on the same day that the department had filed a civil antitrust lawsuit in the Eastern District of New York challenging rules put in place by Visa, MasterCard, and American Express.

Under the agreement with MasterCard and Visa, retailers can now inform customers about swipe fees and provide them with incentives for using payment methods that cost merchants less to accept, including cash, checks, or other payment types that avoid transaction fees or have lower transaction fees. However, because American Express has not settled with the Department of Justice, retailers that take American Express cards are still bound by agreements that prohibit them from offering incentives to customers who use different cards. Visa and MasterCard control an estimated 80 percent of the card market, according to the National Retail Federation.

Holder noted that Visa, MasterCard, and American Express don’t just impose swipe fees on credit card purchases (a cost passed onto the consumer), "they also prevent merchants from offering consumers any cost-saving options, such as discounts or rewards for using less expensive forms of payment," adding that "the companies put merchants and consumers in a no-win situation: Accept our card, pay our fees, and don’t even think about trying to get a discount." In 2009, the three card companies collected more than $35 million in swipe fees, he noted.

At a press conference on Monday, Holder said, "Today’s settlement will enable some Visa and MasterCard customers to receive the benefits of competition right away," noting, however, that "while it is an important step forward, as long as one credit card company continues to impose anticompetitive rules, there is more work to do."