You've heard about the Visa/ MasterCard antitrust suit (issue 98:11:03) and the previous suit filed by Wal-Mart, Sears, and other retailers against the card associations (issue 97:03:02). The Antitrust suit has to deal with credit cards and the retailers' suit deals with debit cards. Until now.
The Department of Justice has subpoenaed documents in the debit card/retailers' lawsuit brought by Wal-Mart, Sears, and other retailers. The documents are to be used in the credit card/antitrust case. The retailers' suit charges that Visa and MasterCard's requirement that stores who accept credit cards must also accept debit cards is unfair to those non-bank card issuers (AMEX and Discover among others) who do not have access to deposit accounts and therefore cannot offer debit or other multifunction cards. It states that Visa's and MasterCard's member banks have control of deposit accounts and therefore have control of the debit market.
The government believes that the issues in the retailers' suit are similar to those in the antitrust suit. They also believe that Visa and MasterCard rules "prevent banks, as the purchasers of network products and services, from obtaining competitive offers from Discover/Novus and AMEX as a way to spur better products and services from each of the networks, including Visa and MasterCard."
Noah Hanft, senior vice president and U.S. counsel for MasterCard said, "The notion that American Express can't compete is simply ludicrous. An effort is being made to concoct a speculative theory that Amer-ican Express won't be able to compete at some point in the future, based on a guess as to what the payments industry will look like down the road. With the advent of stored value, the payment card of the future need not be linked to a depository relationship."
The main issue of the controversy is that the Justice Department believes the credit and debit issues overlap and the chains feel it is an abuse of power for Visa and MasterCard to force stores to accept debit cards, especially since debit has higher interchange rates than some other payment options.
The judge feels that the court is justified in asking for the documents because both cases deal with the same issues: the fact that Visa and MasterCard "exercise market power" and the banks "collectively restrain network-level competition by enacting exclusionary rules."
The prosecutors wrote, "Innovation and competitive development in network products and services are stifled, product quality suffers, and ultimately, the value received is diminished."
The trial is scheduled for October but the presiding judge withdrew in November of last year, so it may get rescheduled. The date for the Wal-Mart, Sears, et. al. trial has not been set, even though that suit was filed two years ago.
