The surprise announcement by U.S. District Judge John Gleeson — just as the trial was set to begin — left Visa USA as the remaining defendant in the closely watched lawsuit.
Gleeson gave no details of what he called the "11th-hour settlement," saying only: "The case is settled as to MasterCard." He ordered MasterCard, Wal-Mart and other plaintiffs in the suit not to speak publicly about the settlement.
"I don't want this jury pool tainted by that," the judge said, before he began questioning potential jurors for what was left of the suit. Opening arguments were expected later Monday in Brooklyn federal court.
A MasterCard spokeswoman in the courtroom declined comment on the settlement, citing the judge's just-imposed order.
The retailers are suing for billions of dollars. They claim Visa and MasterCard have tried to monopolize the fast-growing market for debit cards in the United States by insisting that merchants who accept their credit cards must also accept their debit cards.
The retailers say the two card companies charge unfair fees, eventually driving up costs for consumers. Visa and MasterCard say the policy, known as "honor all cards," is important so that consumers can have more choice.
The case centers on how stores process transactions made with debit cards — the highly popular plastic cards that deduct cash from consumers' existing bank accounts, rather than building up their debt with credit accounts.
Visa and MasterCard want the merchants to clear those transactions on Visa and MasterCard systems, requiring a signature — and costing the merchants a fee. Merchants would rather clear them on less expensive, independent networks that use personal identification numbers, or PINs.
Before the settlement, experts estimated the trial could last well into summer and any verdict could be delayed for years on appeal. The case settled Monday was a consolidated version of a slew of suit filed against MasterCard by Sears Roebuck, The Limited and Safeway.
The case is a clash of giants. According to its most recent annual report to the Securities and Exchange Commission, MasterCard processed more than $1.1 trillion in transactions in 160 currencies last year. Wal-Mart employs 1 million people and operates more than 1,600 stores in the United States.
According to Credit Card Management magazine, in 2000, Visa had a 47 percent share of the U.S. credit card market, and MasterCard held a 28.4 percent share — meaning the two firms controlled more than three-quarters of the market.