Antitrust Suit Targets Visa, MasterCard

Article excerpt

WASHINGTON (AP) -- The Justice Department sued Visa and MasterCard, the nation's largest credit card networks, on grounds they restrain competition and limit consumers' choices.

Together, the two account for 75 percent of credit card sales in the United States, according to the government. Closest rival American Express covers only 18.4 percent of the market, and the Discover card has 5.6 percent.

In a lawsuit filed Wednesday in federal court in New York City, the Justice Department challenged the joint control of the credit card networks by the same group of large banks. The government also challenged rules imposed by both Visa USA and MasterCard International that bar banks issuing their cards from doing business with smaller, competing credit card networks. "These exclusionary rules deny consumers the ability to choose among a maximum variety of card products," Attorney General Janet Reno said. "America's consumers have lost out." In denying the allegations, Visa and MasterCard insisted their industry is among the nation's most competitive. It was unclear whether the government is seeking the sort of competition that would lower credit card interest rates Americans pay. Over time, more competition could bring down interest rates, suggested Assistant Attorney General Joel I. Klein, head of Justice's antitrust division. But he said that wasn't the immediate focus of the government lawsuit. "That's a bit of a jump," said Thomas Facciola, a credit card industry analyst at Lehman Brothers. Consumers already can get special deals on credit cards, such as low introductory "teaser" rates touted through the mail, he noted. Klein said Visa and MasterCard "really don't compete with each other... because they're both 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 new and better products and services," Klein said. That lack of competition delayed for about a decade the introduction of so-called "smart cards," which use a computer chip to expand ways people can make purchases, Reno said. The government lawsuit grew out of an investigation into a complaint almost two years ago from American Express. …


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