The settlement preserves the important consumer benefits of MasterCard's Honor All Cards rule, while giving merchants flexibility to choose how broad a range of payment choices to offer their customers. In exchange for settlement of all claims, MasterCard agreed to pay ten annual installments of $100 million each into a settlement fund account, except for the first year when the payment will be $125 million.
"We're delighted to have reached an agreement that protects our brand and the key consumer benefits underlying the Honor All Cards rule. With the prospect of a lengthy court process behind us, we can get back to focusing on being the best business partner for our customers," said Robert W. Selander, MasterCard president and CEO.
Under the terms of the settlement, MasterCard's key consumer protections prohibiting merchants from surcharging cardholders or discriminating against any MasterCard card or cardholder will be maintained for credit and charge cards and honored by merchants who continue to accept MasterCard debit cards. Merchants will have the right to choose not to accept U.S. - issued MasterCard debit cards, and under the terms of the agreement, MasterCard is free to establish an Honor All Cards rule for MasterCard debit cards.
MasterCard, which previously blended credit and debit into a single interchange rate, will establish a separate interchange rate for MasterCard debit transactions by August 1, 2003. The new interchange rate for debit will be at least one-third lower than the existing interchange rate, and will be set at a level that should incent both issuance and acceptance of MasterCard debit cards. MasterCard will also develop rules requiring issuers to clearly and consistently identify MasterCard debit cards on their face and to make these debit cards identifiable through electronic terminals.
Selander said "We are confident that with the litigation behind us, MasterCard merchants will recognize the extraordinary value of offering the broadest range of choice to consumers and will continue to accept all MasterCard products."
"We're glad that by coming to an agreement with the plaintiffs, we can avoid the disruption to our business of a lengthy trial, and can now get back to the business of focusing on our customers, strengthening our core services, and differentiating ourselves through customized services and solutions," he said. "There continue to be enormous global opportunities in both the credit and debit arenas, and now we can concentrate on pursuing those opportunities, and continuing to build on the success we've achieved."
In agreeing to the proposed settlement, MasterCard in no way admits to any improper conduct with respect to the plaintiffs' charges. The agreement is subject to court review and approval.