WASHINGTON (FNS) -- The trial pitting the U.S. government against Visa International, Foster City, Calif., and MasterCard International, Purchase, N.Y., over allegations the credit card giants illegally bar banks from issuing other cards is set to begin this week in Federal Court in New York.
ss the state of competition among these general-purpose credit-card players.
Discover and American Express argue that Visa and MasterCard illegally protect their upwards of 75% market share by barring member banks from issuing Discover and American Express cards. Consequently, growth for American Express and Discover is stifled, officials from the two companies said.
Harvey Golub, American Express chairman and chief executive officer, told the committee: "It's as if Coke and Pepsi got together and told supermarkets in the U.S. they could carry both Coke and Pepsi, but no other soft drink."
Visa and MasterCard officials testified their companies should be judged as not-for-profit membership corporations owned by some 8,500 banks who compete among themselves for consumer credit card business on the basis of interest rates and other terms. Visa and MasterCard officials also noted Discover and American Express are in another category as investor-owned, for-profit companies. So, they argue, if Visa and MasterCard-member banks were to offer other cards, it would be like allowing Burger King to sell its french fries at McDonald's.
"MasterCard is confident that it will prevail," said Noah Hanft, MasterCard's general counsel. Meanwhile, after the Justice Department's case is dispatched, Visa and MasterCard will have another lawsuit to deal with. Pending is a case by the nation's biggest retailers, including Wal-Mart Stores, Bentonville, Ark., who are seeking $8.1 billion in damages from Visa and MasterCard for alleged unfair control of the debit card business, which retailers argue has kept stores' transaction fees and costs for consumers high. In February, a judge granted the case class-action status, which Visa and MasterCard are currently challenging.