Parallels Seen in Microsoft, Cards Cases

By Lee, W. A. | American Banker, July 2, 2001 | Go to article overview

Parallels Seen in Microsoft, Cards Cases


Lee, W. A., American Banker


An appeals court's mixed ruling in the government's antitrust case against Microsoft Corp. could have implications for the civil lawsuit that merchants have filed against Visa U.S.A. and MasterCard International over debit card policies.

Visa and MasterCard said the Microsoft ruling Thursday by the U.S. Court of Appeals for the District of Columbia Circuit could bolster their position in the so-called Wal-Mart case, though other observers said the decision would help the merchants. The lead attorney for the merchants, Lloyd Constantine, said he did not think it would have any effect on his case.

All sides seemed to agree in finding parallels between the allegations in the Justice Department's case against Microsoft and those in the retailers' lawsuit against the card associations, for which no trial date has been set. Like Microsoft, Visa and MasterCard are accused of trying to monopolize their market and are charged with tying one product -- in this case, debit cards -- to a second, credit cards, in which they have market power.

Both the plaintiffs in the Wal-Mart case and the prosecutors in the Microsoft case argue that the monopoly practices and tying arrangement violate the Sherman Act, a pillar of antitrust law. Some people involved in the Microsoft trial -- and others who are keeping a close eye on it -- say that the appeals court's analysis of the government's charges may influence the District Court's behavior when its considers Wal-Mart's accusations.

The Wal-Mart case cannot go to trial before a decision is given by the U.S. Second Circuit Court of Appeals in New York, which is considering Visa's and MasterCard's appeal of the class-action status granted the case. If the appeals court reverses this certification, the case would go to trial more quickly because there would be fewer plaintiffs to notify, but if the court upholds the class-action status, lawyers would have to contact the four million merchants who qualify for the class.

David A. Balto, former policy director of the competition bureau of the Federal Trade Commission and now a partner in the antitrust group of White & Case LLP, said the Microsoft case "is a wonderful analogy to the Wal-Mart case."

Mr. Balto said that, on the major issue, the Microsoft decision is favorable for the merchants. "The good news for Wal-Mart is, the court found Microsoft was a monopolist."

He added, "That's a nice precedent on which the Wal-Mart claim can set sail in establishing that Visa has market power."

On the tying issue, the appeals court rejected Judge Thomas Penfield Jackson's analysis and remanded the case to District Court. Though the appeals judges agreed with Judge Jackson that Microsoft had tied its Web browser, Internet Explorer, to its platform, the Windows operating system, it ruled that the per se standard is not applicable to the software platform market. Instead, the trial judge must apply a "rule of reason" to decide whether valid business reasons exist for tying the two products together.

In the Wal-Mart case, the merchants say that unfair rules by Visa and MasterCard force them to accept the associations' debit cards despite those products' higher fees compared to other debit cards. The class seeks monetary compensation as well as association rule changes that would decouple acceptance of credit cards from debit cards. …

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