Noncompetitive credit cards

Antitrust: Feds contend that Visa and MasterCard are organized to stifle innovation and creativity

June 21, 2000

EVER WONDER why Visa, the nation's largest credit card company, knocks American Express in its advertisng but never says anything bad about MasterCard, its other major competitor?

That, in a nutshell, embodies the federal government's antitrust lawsuit against the nation's two largest credit card organizations.

The government is not suing two companies, but rather two nonprofit joint ventures that are supported by banks, credit unions and savings and loans that issue Visas and MasterCards. The government alleges that these financial institutions have overlapping membership on the cards' boards, ensuring that the two organizations never effectively compete.

The product of this noncompetitive situation is not price gouging, but a deliberate stifling of innovation - particularly online- that would benefit the American consumer. If the government can prove that Visa and MasterCard used their market power to stifle innovation solely to preserve thier dominant position, then a remedy that encourages competition and innovation will be needed.

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