About four months ago I blogged about Discover's $6 Billion lawsuit against the duopoly called Visa and MasterCard. Here's a direct quote from that post:
"MasterCard's settlement with AmEx is only Part One. Lloyd Constantine is heading up Discover's antitrust lawsuit and is seeking $6 Billion in damages. (Visa said at the time the amount was ``dramatically overstated'' and MasterCard called the suit "baseless.''
Maybe MasterCard might want to look up the word "baseless" in a dictionary. They might also consider the savings derived from representing themselves in court since their attorneys aren't getting "any better "results. Here's a better idea... admit wrongdoing and just pay up. Then consider ceasing and desisting with these types of business practices. After all, Visa and MasterCard have demonstrated this behavior for many years now and their track record in court is dismal."
Even armed with this helpful advice - (and I know they got it because James Issokson, Vice President, Reputation Management, MasterCard International (Hi Jim!:) subscribes to this blog) MasterCard remained "clueless" as to what "baseless" means. So...what do they do? At the very last moment (their modus-operandi, designed to squeeze every last penny from their anti-competitive/unethical practices) as jury selection in this baseless case was set to begin, they decided to settle rather than go to court and risk triple damages.
Never has there been two companies I'd love to see fall on their collective butts more than these two "snakes in the grass." I have my reasons for feeling the way I do and here they are: (from a previous post in this blog)
"How much did Visa and MasterCard profit over and above the settlements by engaging in this type of corporate rogueness? They have been found guilty time after time against "major players" in the industry. These major players (Wal*Mart, AmEX, Discover, etc) are laced with deep pockets and can withstand the enormously expensive and time-consuming process involved with taking these big duopoly boys on. Smaller players such as Pay By Touch, a company of which I was a founding member, aren't as fortunate.
Case in point...Visa and MasterCard both classified" a "more secure" biometric transaction as a "less secure" Card Not Present (CNP) transaction. In reality, a biometric transaction is inherently more secure than a "card present (CP) transaction, let alone a CNP transaction. There's not an analyst alive who would disagree. But Visa and MasterCard did. The end-result of Visa/MC defining biometrics as a CNP transaction was severe in terms of preventing retailer participation. After all, why would a retailer switch to biometrics in order to pay a higher fee than what they were currently paying? They wouldn't, and Visa and MasterCard knew it. That's why retailers like SuperValu only allowed biometrics to be ACH based. V/MC froze us out of the market and it cost PBT (and me) millions. (FYI - Discover provided PBT with a special interchange rate)
Based on the V/MC track record in these anti-trust lawsuits, I'm thinking that shareholders of Pay By Touch should bring a class-action lawsuit against Visa and MasterCard. Better yet, if we could file a "baseless" one maybe in 5 years we'll read an announcement similar to this one...
Visa has reached an agreement in principle with Discover to settle litigation pending since 2004,” Visa said Tuesday. “The specific terms of the settlement are still being negotiated and will be made available when a final agreement has been reached.” MasterCard issued a similar statement.
"MasterCard's settlement with AmEx is only Part One. Lloyd Constantine is heading up Discover's antitrust lawsuit and is seeking $6 Billion in damages. (Visa said at the time the amount was ``dramatically overstated'' and MasterCard called the suit "baseless.''
Maybe MasterCard might want to look up the word "baseless" in a dictionary. They might also consider the savings derived from representing themselves in court since their attorneys aren't getting "any better "results. Here's a better idea... admit wrongdoing and just pay up. Then consider ceasing and desisting with these types of business practices. After all, Visa and MasterCard have demonstrated this behavior for many years now and their track record in court is dismal."
Never has there been two companies I'd love to see fall on their collective butts more than these two "snakes in the grass." I have my reasons for feeling the way I do and here they are: (from a previous post in this blog)
"How much did Visa and MasterCard profit over and above the settlements by engaging in this type of corporate rogueness? They have been found guilty time after time against "major players" in the industry. These major players (Wal*Mart, AmEX, Discover, etc) are laced with deep pockets and can withstand the enormously expensive and time-consuming process involved with taking these big duopoly boys on. Smaller players such as Pay By Touch, a company of which I was a founding member, aren't as fortunate.
Based on the V/MC track record in these anti-trust lawsuits, I'm thinking that shareholders of Pay By Touch should bring a class-action lawsuit against Visa and MasterCard. Better yet, if we could file a "baseless" one maybe in 5 years we'll read an announcement similar to this one...
Visa has reached an agreement in principle with Discover to settle litigation pending since 2004,” Visa said Tuesday. “The specific terms of the settlement are still being negotiated and will be made available when a final agreement has been reached.” MasterCard issued a similar statement.
Based on the fact that pretrial rulings by U.S. District Judge Barbara S. Jones in August were favorable to Discover, the case had base. Looks like MasterCard's comments regarding the case were the only thing that was "baseless" here.
I'm taking a wait and see approach on Visa's position that the $6 Billion was "dramatically overstated" as the terms have yet to be released. But Visa and MC settled with American Express for $4.05 Billion, and I suspect that this amount will be higher...
I'm taking a wait and see approach on Visa's position that the $6 Billion was "dramatically overstated" as the terms have yet to be released. But Visa and MC settled with American Express for $4.05 Billion, and I suspect that this amount will be higher...
On a personal note, I've been involved in the payments industry for a long time and it absolutely thrills me to see companies that operate the way this duopoly known as Visa and MasterCard operate take $4 billion dollar hits.
In a post entitled:"There Are Some Things Money CAN buy" I stated that they solved their problem by IPO'ing. I even suggested a new ad campaign for MasterCard:
In a post entitled:"There Are Some Things Money CAN buy" I stated that they solved their problem by IPO'ing. I even suggested a new ad campaign for MasterCard:
Screw with Wal Mart: $1.0 Billion
Screw with American Express: $1.8 Billion
Screw with Discover: $3.0 Billion?
IPO to cover damages: Priceless!
Here's the article from the Chicago Tribune...I'll follow up with the amounts that both Visa and MasterCard have to shell out when it's announced. Here's hoping it's the whole $6 Big Ones!
Discover settles antitrust suits against Visa, MasterCard
By James P. Miller | Tribune staff reporter 1:52 PM CDT, October 14, 2008
Discover Financial Services Inc., which has been pursuing antitrust claims against credit-card industry rivals Visa Inc. and MasterCard Inc., reached settlement agreements with both companies as the lawsuit was about to go to trial.
Terms haven't yet been disclosed, but the Riverwoods company has been seeking billions of dollars in damages from the two firms.
Discover hasn't issued a statement yet, but the settlements were disclosed as jury selection was set to begin in a Manhattan federal court.
MasterCard and Visa issued statements confirming that they had reached agreement in principle on an out-of-court accord with Discover and that the parties are discussing specific terms of the settlement. Details will follow the conclusion of those talks, the two companies said.
Discover sued in 2004, alleging that MasterCard and Visa had improperly damaged its business by pursuing a policy in which banks were forced to choose between issuing their cards or issuing cards issued by Discover.
American Express filed a similar complaint against Visa and MasterCard, and those two companies earlier agreed to settle the Amex lawsuit for up to $4.05 billion.
Under terms of its spinoff from former parent Morgan Stanley, Discover will pay Morgan Stanley the first $700 million recovered from the two defendants, and to split 50-50 any amount of the settlement proceeds above $1.5 billion, until Morgan receives a total of $1.5 billion.
Pretrial rulings by U.S. District Judge Barbara S. Jones in August were favorable to Discover, and probably increased the likelihood that Visa and MasterCard would settle, experts said at the time.
While details are scant so far, said Keefe,Bruyette & Woods analyst Sanjay Sakhrani in a report to investors, "we believe there is the potential for Discover to do something with a chunk of the money it receives such as: 1) add to the loan loss reserve and/or 2) using proceeds to spend towards some type of marketing campaign."
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