Discover Settles Suit Against Visa and MasterCard

Discover Financial Services, Inc. has settled a case against rivals Visa and MasterCard for alleged anti-competitive behavior.

While the amount of the settlement was not announced, some estimates put it as high as $3 billion to $4 billion. Discover had claimed damages of $6 billion (“Discover Seeks $6 Billion from MasterCard, Visa,” June 10). Under federal anti-trust laws, that amount would have been automatically tripled if the case had gone to court, as it was scheduled to do this week.

The long-running lawsuit had claimed that Visa and MasterCard’s processing rules for issuing financial institutions had prohibited them from issuing cards on other networks, notably Discover and American Express, preventing them from benefiting as credit card business exploded over a 15-year period. American Express settled its similar suit with the two card companies during the summer (“MasterCard to Pay American Express $1.8 Billion to Settle Antitrust Suit,” June 25).

The settlement could hardly come at a better time for Discover, which, like other card companies, is struggling against increasing defaults and chargeoffs and steadily eroding investor confidence. Since Oct. 1, the price of Discover’s common stock has plummeted from more than $14 two weeks ago to less than $9.50 a share Thursday morning.

Morgan Stanley, former parent company of Discover, will receive $700 million of the settlement under an agreement struck between the two during the mid-2007 spinoff of Discover.