The Department of Justice (DOJ) today announced a settlement with Visa and MasterCard and an ongoing lawsuit against American Express regarding the companies' allegedly anticompetitive practices. In order to accept credit cards from these networks, merchants must agree not to provide discounts to customers using other card brands or some other payment forms. The government argues this strategy by the networks is bad for competition. Although Visa and Mastercard have agreed to settle on this issue and allow retailers more flexibility, American Express is still fighting. There are several interesting things to note about this announcement.
Big winner: Discover and Retailers
Assuming the DOJ ultimately triumphs, then this news is quite good for any company other than those big three networks. At the top of that next tier of credit card companies is Discover. It doesn't appear to be named in the suit. Presumably it still has a small enough share of the market that it could benefit from increased competition with the more popular networks.
Of course, retailers will also probably have higher profits. If they can provide an incentive for people to use payment options with lower interchange fees, then they'll make more money. Presumably they'll generally leave a little room between their fee savings and the discount to customers to allow a little more profit.