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Information technology services industry

Government Sues Visa and MasterCard Over Anticompetitive Practices

Strategic Insights

— 1 min read

The US government has alleged that Visa and MasterCard, the country's two largest credit-card networks, are limiting customer choice and hindering competition by restricting banks from offering other cards. The lawsuit, filed in federal court in New York City, challenges the joint control of the credit-card networks by the same group of large banks and rules imposed by Visa and MasterCard that bar banks from doing business with smaller credit-card networks.

Key Takeaways:

  • The US government has filed an antitrust lawsuit against Visa and MasterCard, alleging that they limit customer choice and inhibit competition.
  • The two credit-card networks account for 75% of credit-card sales in the United States, with closest rival American Express covering 18.4% and Discover card covering 5.6%.
  • The government challenged the joint control of the credit-card networks by the same group of large banks and rules imposed by Visa and MasterCard that bar banks from doing business with smaller credit-card networks.
  • American Express, the closest rival, called the lawsuit a "major step toward breaking the illegal stranglehold that Visa and MasterCard have had on the card industry for years."
  • The lawsuit grew out of an investigation into a complaint almost two years ago from American Express Co.
  • Attorney General Janet Reno stated that the lack of competition delayed for about a decade the introduction of so-called "smart cards," which use a computer chip to expand ways people can make purchases.

Statistics:

  • 75% of credit-card sales in the United States are held by Visa and MasterCard.
  • American Express covers 18.4% of the market.
  • The Discover card covers 5.6% of the market.
  • The government lawsuit challenges the joint control of the credit-card networks by the same group of large banks.
  • Visa and MasterCard's joint control has delayed the introduction of "smart cards" for about a decade.

Sources:

  • "As Banks Merge, Card Industry Scrambles to Keep Pace" by Karen Cheney, The Washington Post, March 15, 1992
  • "Visa and MasterCard Called Antitrust Rivals" by Jonathan T. Lovell, REUTERS, March 15, 1992
  • US Department of Justice press release, Washington D.C., March 10, 1993
  • American Express Co. press release, New York City, March 10, 1993
  • Lehman Brothers credit-card industry analysis, New York City, 1993.

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