EXCEEDING THEIR LIMITS?

December 8, 1998
		In a major antitrust case, the U.S. Justice Department has accused the Visa and Mastercard in court of unfairly dominating the credit card industry and stifling innovation. Do the facts support the government's case? Return to this forum's introduction.

Have Visa and Mastercard prevented the implementation of smart cards? Will this case change credit card interest rates or late fees? Will more stores now accept American Express, Discover and other cards? Is the antitrust case improve consumer privacy? Does this case affect debit cards?     Nov. 26, 1998: A NewsHour background report on the government's antitrust case against Visa and Mastercard. Browse the NewsHour's business coverage

Dale Blotter of Los Angeles, CA, asks: The Justice Department case seems primarily focused on the duality of credit card issuance by the same banks.  An issue that seems of equal if not greater importance  is the efforts by VISA and Mastercard to control the debit card arena as well.  VISA with it's introduction and heavy promotion of the VISA. Check product seems intent on pushing out the Regional ATM/Debit Networks from point-of sale debit and forcing higher fee structures  similar to credit card transactions.  The merchant community has actively opposed this product as evidenced by the class action lawsuit filed against the two card associations.  Why didn't the Justice Department include this issue in their antitrust action and is there any chance of it getting included in the future? If VISA and Mastercard get control of debit that  would probably result in higher costs to consumers as retailers pass on those increased payment fees in the form of higher prices.  I would appreciate both parties views on this. Kevin Arquit, outside counsel for Mastercard International, responds: The question relates primarily to activities of Visa, not Mastercard. In any event, nothing in Mastercard's marketing of its debit products forecloses competition in any way. Merchants which accept Mastercard are free to accept any other form of payment, including other debit cards. Merchants are also free to ask the consumer to use another form of payment, so long as they honor the Mastercard card if the consumer chooses to use it - and freedom of consumer choice is the real issue in the private law suit. Also, plaintiffs in that litigation do not represent the "merchant community" - many merchants across the country have joined in actively promoting Mastercard debit, obviously recognizing that it benefits them as well as consumers. Lloyd Constantine, an attorney that has filed a separate case against Visa and Mastercard, responds: I am the lead counsel for the retailers, principally Wal-Mart, The Limited, Sears, Safeway, Circuit City, the National Retail Federation, the International Mass Retail Association and the Food Marketing lnstitute on which is litigating the case you refer to in your question. I do not know why the Justice Department did not restate the retailers claims in their case but the likely reasons are as follows: 1) Large and sophisticated retailers like Wal-Mart etc. have the legal and financial resources to properly take care of these issues in their lawsuit which was filed almost two years before the Justice Department case, or 2) The FTC has been investigating the issues which are the subject of the Wal-Mart lawsuit. It is also important to note that while the specific relief requested in the Wal-Mart and United States cases are different, many of the issues in the two cases overlap.