Magazine article American Banker

Ruling Will Limit Card Competition, MasterCard Says

Magazine article American Banker

Ruling Will Limit Card Competition, MasterCard Says

Article excerpt

To the Editor:

A page 1 story on Oct. 12, "For Card Industry, Whole New Ball Game," mentions a new reality in the payment card industry but incorrectly describes what that reality is.

By granting American Express access to MasterCard's and Visa's network of banks, Judge Barbara Jones' ruling, should it withstand appeal, will not increase competition and choice in the industry. Instead, it will limit it, to the detriment of American consumers.

The trial record, including testimony by Discover Card Services president David Nelms, clearly demonstrates that American Express' strategy of targeting powerhouse banks with the lure of higher fees from merchants will restrict competition and harm consumers.

Your articles about the ruling, as well as commentary on the ruling by analysts, recognize that American Express only is interested in pursuing relationships with banks that can give them access to high-spending consumers -- the traditional profile of the Amex customer.

Allowing American Express to target select members of MasterCard's and Visa's open associations, and funnel high-end transactions to its closed network, will harm consumers and affect MasterCard's ability to support the thousands of banks, including the smaller community banks, which American Express is unlikely to target.

This will undermine community banks' ability to continue to offer (their) customers a variety of payment cards, offerings made possible through the banks' joint venture(s) with cooperative, not-for-profit card associations that don't compete with them.

Furthermore, Judge Jones' ruling recognized how consumers benefited from the intense competition between MasterCard and Visa, which was appropriately described ... by Visa president Carl Pascarella, who said his goal is to "kill MasterCard." These benefits, Judge Jones said, include the dramatic drop in prices to consumers and the "rapid innovations in systems, product offerings, and services" offered by MasterCard. …

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