Visa USA agreed late last night to pay more than $2 billion to settle an antitrust lawsuit brought by Wal-Mart Stores Inc. and other major retailers alleging that the credit card company illegally forced them to pay high processing fees for debit card transactions.
The settlement came just two days after Visa vowed to defend its debit card policies even though its chief rival, MasterCard International Inc., had agreed to pay more than $1 billion to settle a six-year-old lawsuit that was scheduled to go to trial in New York this week.
The jury had been picked but opening arguments were postponed yesterday morning as Visa and the major retailers said they were in settlement discussions.
Under the terms disclosed last night, Visa and MasterCard will significantly lower the fees they charge merchants to process their debit cards starting Aug. 1, the earliest their computer systems can implement the change, said sources familiar with the settlement.
Because of the delay, both credit card companies agreed to pay an additional $25 million to retailers immediately.
Also, as of January 2004, MasterCard and Visa will no longer require retailers that honor their credit cards to also accept their debit cards.
Noah Hanft, general counsel for Visa, called the settlement "a practical solution" to a case in which retailers had sought as much as $100 billion.
Major chains such as Wal-Mart, Sears, Roebuck and Co. and Circuit City Stores Inc. sued the two major credit card firms, saying that policies requiring them to process their debit cards raised their costs significantly because such "signature" cards incurred far higher fees than debit cards that use private banking networks such as Star, Most and Pulse.
Visa and MasterCard have charged merchants about 1.5 percent of each sale to process a credit or debit card transaction, while the private debit network has charged 15 to 25 cents per transaction. Thus, on a $100 sale, a merchant would have to pay about $1.50 to accept a Visa or MasterCard debit card but no more than 25 cents to accept other debit cards.
MasterCard said its fees would drop by at least one-third under the settlement.
