As I mentioned in a post on December 5th, Morgan Stanley apparently had "secret talks" with Visa behind Discover's back and now they are suing each other over the $2.75 billion take that Discover collected from Visa in an antitrust lawsuit. What was Morgan Stanley thinking?

Bottom line is that Discover says it's not paying a dime to Morgan Stanley because they tried to sabotage the settlement talks behind their back and thus forced them to settle for less than they would have. Kind of puts a new twist on antitrust, and once again Visa is involved. Morgan Stanely should have just left well enough alone, but since they were capped at 1.5 billion, Discover claims they had no vested interest in seeing the case go to trial.

As the title of this post suggests, my guess is that Visa played Morgan Stanley in order to reach a lower settlement...and it worked. Now there's a whole new court case that is arising out of the settlement of another. It's a crazy world, but that's life, and life accepts Visa! Apparently, Visa is worthy of forever being associated with antitrust...

I'll continue to follow the case here on the PIN Debit blog. As it looks right now, the case won't reach trial until the end of 2009, but I'm sure there will be some interesting tidbits in the meantime, and I'll cover those tidbits here.

From todays New York Post:

"The negotiations with Visa and MasterCard dragged on, and the two sides were set to go to trial this October.

But the weekend before the trial was to start, Discover claims that it learned for the first time that Morgan Stanley was talking separately to Visa and MasterCard to try to settle case before it moved to trial. Fearing that Morgan Stanley had in some way compromised its trial strategy, Discover says that it was forced to settle the case for much less than what it might have gotten at trial.

Discover then refused to pay Morgan Stanley its cut of the settlement, claiming that Morgan Stanley violated the terms of their agreement that Discover had sole negotiating power.

Morgan Stanley sees things quite differently. It has sued Discover to get its $1.3 billion cut of the $2.75 billion payout.

Morgan Stanley claims that Discover always knew it was speaking with Visa and MasterCard in order to work out a deal. It even gave up $100 million of its cut to get Visa to sign on to the $2.75 billion, nonnegotiable figure proposed by the arbiter of the case.

Discover has now countersued, claiming that Morgan Stanley’s attorneys were under pressure from John Mack, Morgan Stanley’s chief executive, to settle the case quickly. Discover claims that since Morgan would not get a penny over $1.5 billion, it had no interest in seeing the case go to trial, where Discover could have reaped more cash

Continue Reading at NY Times