Consumer Payment Card News

Big Stakes

The U.S. Department of Justice’s antitrust lawsuit against VISA and MasterCard gets underway this week in New York City. The case revolves around various rules adopted by VISA and MasterCard that restrict member banks from doing business with American Express and Discover. The potential damages from the lawsuit could run into billions of dollars. Given the stakes are so high, tempers have been flaring. At a recent Senate hearing, VISA and MasterCard asserted that the DOJ’s proposed remedies in the lawsuit would only serve the interests of a single industry competitor. VISA/MC said if the DOJ prevails in its case the end result would be a victory not for competition and consumers, but for American Express. MasterCard testified that by allowing American Express to “free-ride” on the investment of MasterCard and its members and cherry-pick select members from MasterCard’s only distribution channel, the consumer misses out on the benefits of competition. Meanwhile VISA testified that it is no secret that American Express, claiming that it cannot compete with VISA, has long exhorted the DOJ to bring the action. On the other side of the fence, American Express and Discover asserted that VISA and MasterCard have conspired to limit competition in the U.S. card industry. Discover said when it comes to all these anticompetitive and anti-consumer actions undertaken by the card associations, the ringleader is VISA. American Express testified that VISA and MasterCards anticompetitive behavior has damaged the interests of consumers; eliminated banks freedom of choice to carry out business as they see fit; increased operating costs to merchants, particularly in the debit card arena; and retarded innovation in the credit card industry. Stay tuned as the fireworks begin this week!

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