SUPERMARKETS GET THE GIFT OF CHOICE

DAVID GHITELMAN

Along with receiving billions of dollars from the nation's two leading payment card companies, supermarkets and other U.S. retailers starting New Year's Day will be able to choose exactly which of the two companies' offerings they wish to use. This is a gift they may consider, as the tagline to one of the companies' ad campaigns declares, priceless.

In late April, shortly before their long-awaited trial was scheduled to start in U.S. District Court, Brooklyn, N.Y., MasterCard International and VisaUSA announced they had settled the class-action antitrust lawsuit brought against them by nearly 5 million U.S. retailers. The original case against the card companies was filed in 1996 by 18 retailers (including Wal-Mart Stores and Safeway) and three industry associations (including the Food Marketing Institute).

The retailers had charged that the card companies had engaged in anticompetitive practices through their "Honor All Cards" policy, which required retailers to accept all the forms of payment the card companies offered. What the retailers objected to in particular was being forced to accept off-line signature debit transactions, which, the merchants alleged, saddled them with considerably higher fees than online PIN transactions.

The settlement called for the card companies to eliminate their Honor All Cards policies by Jan. 1. It also required Visa to pay $2.025 billion to merchants over the next 10 years, and for MasterCard to pay $1.025 billion over the same period. In addition, the settlement required Visa and MasterCard to lower their fees from Aug. 1 through Dec. 31.

In December, Wal-Mart, one of the earliest opponents of the card companies' policies, became the first retailer to announce it would take advantage of the end of the Honor All Cards policy. The company said it will no longer accept MasterCard signature debit cards, effective Feb. 1, because the transaction fees were too high.

MasterCard objected to this expression of retailer free will saying the Wal-Mart decision took choice away from the consumers.

Also in December, the U.S. Department of Justice had been prepared to go to trial to prevent the acquisition by First Data Corp., Denver, which owns a majority share of NYCE of Concord EFS, Memphis, Tenn.,when a settlement was reached.