Visa, MasterCard ready for court battle

Justice Department next week to ward off accusations that they hamper competition by excluding other competitors through their exclusive relationships with banks. The Justice Department sued the card networks in late 1998, alleging they violated antitrust laws by curbing competition. Visa and MasterCard together control more than 75 percent of the U.S. credit card market and are owned by major banks. Visa and MasterCard will argue to a federal court in New York on June 12 that their practices do not harm merchants, consumers or smaller card rivals such as American Express Co. and Morgan Stanley Dean Witter & Co.’s Discover unit. The Justice Department will take aim at a rule — known as exclusivity — that now bars banks that issue Visa and MasterCard cards from also issuing American Express and Discover cards. Another point of contention is banks that issue Visa and MasterCard also own and sit on the governing boards of both networks — a practice referred to as duality. “These exclusionary rules and policies eliminate certain forms of competition among the Visa and MasterCard member banks and have effectively precluded American Express and Discover/Novus from competing to enlist banks in the United States to issue their cards,” the Justice Department wrote in its 1998 suit. Visa and MasterCard, for their part, say a Justice Department victory would allow competitors like American Express free entry into a system the card networks built at their own cost. The case itself is the result of lobbying by American Express, they contend.