Just a few days ago, Discover Financial Services settled an antitrust suit against Visa Inc. and MasterCard Inc. Although the exact figures haven’t been made public, Discover was seeking $18 billion in damages from its rivals in a case that was brought to court back in 2004. According to the lawsuit, Visa and MasterCard placed illegal restraints on trade and essentially forced banks to choose between Visa and MasterCard or Discover and American Express Co.
Although it’s been over four years since Discover filed its lawsuit, the time invested in the case seems to have paid off for the card issuer. After completing pretrial motions, which ruled in favor of Discover, Visa and MasterCard apparently decided to take back some control of the situation by settling rather than risking losing and having to pay an even larger settlement. Those close to the trial are claiming that the settlement came in at $2.8 billion, with $1 billion of that settlement going to Discover’s former parent company Morgan Stanley. These same sources report that MasterCard is being held responsible for $900 million of that settlement while Visa is being held responsible for $1.9 billion of the settlement. These figures are unofficial, however, as none of the companies have published official numbers associated with the case.
Unofficial or not, the settlement has given Discover’s stock price a bit of a boost. Following the settlement, Discover’s stock price rose 11%, Morgan Stanley’s rose 21%, while Visa shares fell slightly. MasterCard, on the other hand, still managed to see a slight increase in value despite the settlement. Considering the fact that Visa has control over 51% of the credit and debit card market in the United States, the slight fall isn’t likely to hurt the company too much. With Discover holding only 3.8% of the market, making it the smallest of the big four credit card companies, the settlement may be just what the company needs to gain somewhat of a foothold in the industry.
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