Next anti-trust case

THE U.S. Government antitrust officials have begun efforts to prove in court that Visa and MasterCard, the world's two biggest credit card networks, limit competition with each other and their rivals to the detriment of consumers.

The outcome of the case could force changes in the structures of Visa and MasterCard, which together control about 75 per cent of the $1.3 trillion market, and transform how competitors like the American Express Company operate. Government lawyers introduced what they contend is damaging evidence from internal Visa and MasterCard documents and from letters and depositions that they say undermine the companies' assertions of broad and vigorous competition.

Both earlier this week and in a pretrial hearing last Thursday, Visa and MasterCard pointed to the way that the banks that use their networks continue to flood consumers' mailboxes with credit card offers, four billion of them last year. But Mr. Melvin A. Schwarz, the Justice Department's lead lawyer in the case, insisted that no amount of competition among the thousands of banks that issue the cards could substitute for meaningful competition between the Visa and MasterCard networks that provide advertising, technical and other support.

The government's focus is on two points that it says stifle competition. One is that each network is controlled by the same group of large banks, a situation known as "dual governance" that the government contends means that the networks have no incentive to create products that would benefit consumers. For example, Mr. Schwarz said, it took almost 15 years for the industry to introduce a so-called smart card. The othermain target is a rule of Visa and MasterCard that bars member banks from issuing cards of rivals like American Express, Discover and Diners Club.

American Express, with virtually no bank outlets for its cards, has sided prominently with the government, drawing criticism from Visa that American Express is the real instigator of the government's suit. American Express and the Justice Department, which says it has been watching the credit card networks for a decade, deny that.

New York Times

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