In a stunning move this week, and shortly before the start of the trial for the Wal-Mart debit card antitrust lawsuit against VISA and MasterCard, U.S. District Judge John Gleeson announced that a settlement had been reached between MasterCard and the merchant plaintiffs. Under terms of the deal, MasterCard has agreed to pay the equivalent of $1 billion in damages, cut fees for off-line debit card transactions, and make concessions over the “Honor All Cards” policy. The surprise settlement delayed opening arguments in the trial for VISA. The implications for VISA, who controls the off-line or signature debit card market, is unclear. MasterCard asked the court on March 14th to sever the plaintiffs’ claims against MasterCard saying it would be prejudicial and could cause substantial jury confusion. The motion was previously denied. MasterCard currently has a 23% share of the off-line debit card market. The class action lawsuit, representing five million merchants in the USA, was filed in 1996 by Wal-Mart, The Limited, Sears Roebuck, Safeway, Circuit City, and three trade associations. The lawsuit charges the card associations with violating U.S. antitrust law by monopolistic and uncompetitive business practices concerning debit cards. The merchants also claim that VISA and MasterCard and their member banks have forced merchants to accept their off-line signature debit card transactions under their “Honor All Cards” rule at rates five to ten times higher than on-line PIN debit card transactions. VISA and MasterCard say that despite several favorable rulings for the plaintiffs in Judge Gleeson’s April 1st Summary Judgment proceeding, the merchants have yet to prove there was any harm to competition and consumers from the “Honor All Cards” rule. The card associations point to the fact that PIN debit card transactions are growing faster than off-line debit and that their competitors control more than two-thirds of the PIN-based debit market. VISA and MasterCard also say that if the merchants prevail, the benefits of universal acceptance will be undermined and consumers will suffer by being denied their right to choose their preferred method of payment. MasterCard noted that its online debit mark, “Maestro,” is currently the least expensive online debit alternative.