- The Washington Times - Thursday, October 11, 2001

Consumer advocates and retailers are applauding a judge's ruling that Visa and MasterCard must allow member associations to issue rival credit cards.
"As a result of this, we'll see more competition in the marketplace, which could lead to better competition in price," said Frank Torres, legislative counsel for the Consumers Union.
Tuesday's ruling by U.S. District Judge Barbara S. Jones was the result of three years of legal wrangling between Visa and MasterCard and the Justice Department. After pressure from the Consumers Union and similar groups, the Justice Department had sued the country's two largest credit-card companies to eliminate exclusionary rules that forbid its member banks from issuing credit cards from American Express, Discover and other smaller rivals.
Visa and MasterCard said they plan to appeal the ruling, partially on the basis that American Express charges higher fees to merchants, and consumers could end up feeling the brunt of that added cost.
"Allowing American Express to target select members of MasterCard and Visa's open associations, and funnel high-end transactions to its closed network, will harm consumers," said MasterCard general counsel Noah Hanft.
Not so, Mr. Torres said.
"Even American Express will have to rethink how they charge," he said. "They'll have to compete just like everyone else."
Meanwhile, U.S. retailers were pleased by the ruling because they are involved in a similar class-action antitrust suit. In that case, retailers have argued that Visa and Mastercard have used "monopoly" power to dominate the industry.
"There were several issues that were common," between the two suits, said Lloyd Constantine, a New York attorney representing the retailers. "In all respects, the judge agreed with our contentions. They were core and key issues to the case."
Key to the decision was Judge Jones' ruling that Visa and MasterCard had dominant market positions in the credit-card market. Together, they make up 75 percent of the $1.3 trillion industry.
Mr. Constantine said that as a result of the ruling by Judge Brown, his case with the retailers was "virtually over." But, he acknowledged, an appeal in the Justice Department case would cause delays, and a different presiding judge could hand down a different decision.
The case was filed in October 1996 and was classified as a class-action suit in February 2000. The suit exposes Visa and MasterCard to nearly $24 billion in damages.
In the wake of Tuesday's ruling, American Express and Discover, which is owned by Morgan Stanley Dean Witter Inc., said they hope banks will take advantage of the ability to offer their cards to customers.
"In light of this decision, we plan to resume our conversations with a number of banks now free to make a choice about possible card-issuing ventures," said Kenneth I. Chenault, chairman and CEO of American Express Co.
But banks were noncommittal on the issue of whether they would now offer American Express or Discover cards.
"We're not going to commit one way or the other," said Tatiana Stead, director of corporate media for Capital One, of Falls Church. "The ruling doesn't change our strategy. We're always interested in the potential for new products and services."
A spokesman for JP Morgan Chase declined to comment, and calls to Wachovia, Citigroup and MBNA were not returned yesterday.

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