Credit card giants are sued
Thursday 08 October 1998
The Justice Department sued both companies, complaining that they are owned by the same set of banks, and that their rules ban members from issuing other cards, discriminating against smaller issuers. Visa and Mastercard are both owned by thousands of banks, including the British clearing banks. Visa has nearly half of America's credit card market, MasterCard has 25 per cent and American Express 20 per cent, according to the Justice Department.
American Express has vigorously complained that member banks in America are barred from issuing its cards, as have other smaller issuers. The case follows a two-year investigation. Both companies said that they would fight the case. "We believe the suit filed today by federal regulators will fail in a court of law because ... consumers have unlimited choices when it comes to credit cards," said Paul Allen, Visa's executive vice- president and general counsel. "We are extremely confident that our structure and policies are lawful and pro-competitive and will vigorously defend them," said Noah Hanft, the senior vice-president and counsel for MasterCard.
Both companies are already under attack on several fronts. Eleven US states announced last month that they were investigating whether their new debit cards would harm competition. The Federal Trade Commission, another competition watchdog, is investigating claims that the companies illegally require retailers who take their credit cards to take their debit cards as well. Several large retailers, including Sears Roebuck, are taking legal action over this.
The Justice Department is also investigating Cirrus and Plus, the world's leading operators of cashpoints, owned by MasterCard and Visa, to see whether they are breaking the law by preventing member banks in the US from eliminating fees for using the machines.
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