Evan Schuman's StorefrontBacktalk

The judge had already killed any claims dating from before January 2004. Visa and MasterCard will both kick in billions for the slush fun— er, for the Class Settlement Cash Escrow Account(s). There’s an eight-month period during which merchants get 10 basis points off their interchange rates. The price-fixing claims showed no signs of having legs.

The agreement allowed for groups of retailers to try and work out better arrangements with the card brands, but here’s what it said: “With respect to any proposals that Visa believes provides reasonable commercial benefits to the parties, Visa will negotiate with such buying groups in an effort to reach a commercially reasonable agreement, and Visa agrees to exercise its discretion and business judgment in good faith.”

That “good faith” phrasing effectively neuters any requirement for Visa and MasterCard to cut rates. But that’s what that $6.05 billion is buying for them—basically, business as usual.

If there’s a conclusion to draw here, it’s that the retailers decided the best they could do was get a cut of $6 billion and an eight-month rate cut instead of fixing the “broken” system. Which means, in practice, the retailers had figured they couldn’t change the system even if they won. That, in turn, means there’s no court-based change that’s going to break Visa—that would require either a change in the law or a change in the market.

The closest we’ll see to a change in the law is something we’ve already seen: the debit interchange cap. That’s it—there won’t be anything more.

And a change in the market? All the hope for that has evaporated in the past few years, as every major alternative payments effort has come back to Visa/MasterCard. PayPal comes closest to being able to shuck them, and Apple is still a wildcard.

It’s the old Microsoft problem: Microsoft didn’t actually have to break the law once it owned the channel (which is why its anticompetitive behavior was so stupid). People assumed they needed Microsoft Windows or Office to do what they wanted to do on a PC. Likewise, customers and retailers assume they need Visa/MasterCard to do what they want to do at the POS. And when customers believe they can’t do without you, you own them.

That’s why, in practical terms, Visa and MasterCard don’t have to change anything with this settlement. And that’s what the retailers are complaining about. It’s also the reason some chains have gotten together to come up with their own alternative payments scheme. That last seems to have gone nowhere—just as every challenge to Microsoft in desktop OSes and office suites on PCs have gone nowhere. No one can conceive of a business model in which challenging Microsoft (or Visa and MasterCard) will actually work.