FOR IMMEDIATE RELEASE
ATR
WEDNESDAY, OCTOBER 7, 1998
(202) 616-2771
WWW.USDOJ.GOV
TDD (202) 514-1888
PREPARED REMARKS OF ASSISTANT ATTORNEY GENERAL JOEL I. KLEIN
"This case affects all Americans. It involves credit cards and charge cards, which consumers and businesses rely on for substantial amounts of their purchases every day.
"Despite the obvious importance of these cards, however, Americans are not getting what they deserve because of the serious anticompetitive practices of Visa and MasterCard, which operate the two largest credit card networks and which, between them, have long controlled at least three-quarters of this market.
"As our lengthy investigation found, and as the complaint we filed today in federal court demonstrates, Visa and MasterCard have engaged in two systematic violations of the antitrust laws. First of all, these two groups -- the number 1 and number 2 players in this market -- really don't compete with each other. That's because they're both controlled by the same banks (an arrangement that is referred to in the industry as "duality"). And, since the same banks issue both cards, they won't allow Visa and MasterCard to engage in head-to-head competition to develop new and better products and services. Indeed, many of the banks that control MasterCard actually issue more Visa cards than they do MasterCards.
"The remarkable thing is that each of the defendants in this case has already admitted to this lack of competition in prior sworn testimony and communications with the Justice Department, as the quotations on Chart 1 indicate. Despite this candor, however, Visa and MasterCard insist on continuing with this patently anti-consumer arrangement.
"Our investigation has uncovered several specific examples where consumers have been hurt by this joint refusal to compete. The Attorney General mentioned smart cards, which were delayed by about a decade; we found similar anticompetitive practices with respect to commercial cards for business use as well as with respect to the development of a system of secure transactions for the internet, something consumers and businesses would obviously welcome. As a Visa executive explained in 1995, "if we had our group [of banks] and [MasterCard] had their group, . . . [an internet product] would be out already." Although this system has subsequently been developed, its appearance was substantially delayed because of duality. And there's no telling what other products and benefits we would have seen had Visa and MasterCard chosen to compete rather than pull their competitive punches.
"In addition to refusing to compete aggressively with each other, these two dominant credit card systems also engaged in a second antitrust violation, this time to protect themselves from competition by other networks. They did this by adopting bylaws or rules that prohibit their members banks -- which amounts to essentially all the large banks in the United States -- from dealing with any of their real competitors, such as American Express or Discover. The language of these prohibitions, which is contained on Chart 2, is revealing.
"These rules reduce consumer choice and further harm competition among the major credit and charge card systems. Significantly, when these policies were questioned by antitrust authorities in other parts of the world -- in Europe and South America, for example -- Visa and MasterCard backed off and decided not to adopt them there. The result has been more competition with better options for consumers and businesses. We look forward to the same results here once these restrictive, anti-consumer rules are knocked out.
"Credit and charge cards -- now, and probably even more so in the future -- are simply too important to limp along in an industry that is competitively impaired. This lawsuit is designed to bring full competition so that America's consumers and businesses can be assured of the very best, most innovative credit and charge card products at the lowest possible prices."
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98-465