Justice Takes Aim at Visa, MasterCard: Antitrust Lawsuit Accuses Them of Anti-Competitive Practices

By Seper, Jerry | The Washington Times (Washington, DC), October 8, 1998 | Go to article overview

Justice Takes Aim at Visa, MasterCard: Antitrust Lawsuit Accuses Them of Anti-Competitive Practices


Seper, Jerry, The Washington Times (Washington, DC)


The Justice Department yesterday filed an antitrust lawsuit against Visa USA and MasterCard International, charging the nation's two largest credit-card networks with unfairly limiting competition.

The lawsuit, filed in U.S. District Court in New York, said Visa and MasterCard - which account for 75 percent of all credit-card purchases nationwide - illegally imposed rules barring banks that use their cards from doing business with smaller, competing credit-card companies, including American Express and Discover.

"These exclusionary rules deny consumers the ability to choose among a maximum variety of card products," Attorney General Janet Reno said in announcing the suit.

"America's consumers have simply lost out. They have lost the benefit of vigorous competition between the two largest credit-card networks, which means they have not enjoyed the innovation that competition brings."

It was not clear whether the government is seeking the sort of competition that would lower credit-card interest rates Americans pay.

Assistant Attorney General Joel I. Klein, who heads Justice's antitrust division, said Visa and MasterCard "really don't compete" since they are controlled by the same banks.

"And since the same banks issue both cards, they won't allow Visa and MasterCard to engage in head-to-head competition to develop newer and better products and services for America's consumers and businesses," he said.

Mr. Klein said "vigorous competition" is critical to ensure consumers have the benefit of the best payment methods, "particularly as more and more commerce is conducted through credit cards and electronic forms of payment."

He also said greater competition likely would result in a lessening of interest rates, although that was not an immediate focus of the suit.

Miss Reno said a two-year investigation by the antitrust division found "persuasive and systematic evidence of the harm done to competition in the credit-card market."

"Credit cards are not just luxuries. They are an important financial tool for many Americans. For millions of people, competition in the credit-card industry is vital," she said.

Last year, total charges on Visa and MasterCard credit cards exceeded $600 billion internationally.

Officials at Visa and MasterCard vowed to fight the suit, arguing they had not violated the law. …

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