NEW YORK (AP) – Visa USA has reached a tentative settlement with Wal-Mart and thousands of other retailers just before their multibillion-dollar lawsuit over the company’s popular debit cards was set to go to trial, both sides said late Wednesday.
Visa USA said in a statement that it had reached “an important agreement in principle” with the plaintiffs and would change its debit card policies.
The deal is worth $2 billion, with terms similar to those agreed to between the retailers and MasterCard International on Monday, a source close to the plaintiffs told The Associated Press.
The retailers claim Visa and MasterCard trapped them into paying high fees by demanding that stores that accept their credit cards also accept their debit cards. They also claim the companies have stifled competition.
Visa vice president Daniel Tarman said that beginning in January, merchants will be able to decide whether they want to continue to accept Visa’s debit cards.
“We believe this settlement is a reasonable and responsible resolution that serves the interests of consumers, merchants and our member financial institutions,” Tarman said.
The merchants were expected to sign the deal Wednesday night, said the source, who spoke on condition of anonymity. Word of the settlement came after a federal judge postponed opening statements in the trial until Friday, saying he hoped he was offering “breathing room” so they could make a deal.
The billion-dollar deal, which still must be approved by the judge, includes an immediate $25 million payment, the source said. Visa and MasterCard have said the “honor all cards” policy is important so that consumers can have more choice. Retailers, who filed suit seven years ago, say the process ultimately costs consumers more money.
The debit cards use a customer’s signature to verify a transaction. Many merchants would rather use less expensive, independent networks that clear debit-card transactions using a personal identification number, or PIN.
Analysts said Visa probably was feeling intense pressure to settle the case rather than face a trial that threatened to drag well into summer – and which could have been more difficult to win without MasterCard fighting alongside.
If the merchants prevailed at trial, Visa could have been liable for damages running into the tens of billions of dollars.
The framework of the MasterCard settlement calls for that company to pay roughly $1 billion to the retailers and to reduce its debit-card fees, the anonymous source said.
Details of the MasterCard settlement are expected to be finalized over the next few days and presented to the judge for approval within a few weeks, said Lloyd Constantine, lead lawyer for the retailers.
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Associated Press Writer Erin McClam contributed to this story.
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On the Net:
Visa USA: http://www.visa.com
MasterCard International: http://www.mastercard.com
AP-ES-04-30-03 2313EDT
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