Lawyers for Visa USA Inc., Visa International Inc., and MasterCard International Inc. will argue that a New York federal district court erred in its application of antitrust law in an Oct. 9, 2001, ruling on a lawsuit brought by the Department of Justice. After a lengthy trial, federal Judge Barbara S. Jones ruled that Visa and MasterCard must eliminate rules that prevent member banks from simultaneously issuing credit cards through American Express.
The Thursday hearing comes as Visa and MasterCard, associations that are owned by thousands of member banks, have increasingly come under legal attack for their fee practices and dominant positions in the card industry.
Last week, Visa agreed to pay $2 billion to settle a lawsuit brought by Wal-Mart Stores Inc. (WMT) and other retailers accusing it of using its market dominance to charge excessive fees and restrict competition on debit-card transactions. MasterCard agreed to pay $1 billion to settle the same suit. Both card associations also agreed to change current policies that force retailers to accept all of their cards.
Separately, after a trial in California state court, both associations were ordered to refund $800 million to consumers for improperly disclosing fees charged in connection with credit-card transactions in foreign currencies.
The appellate-court hearing in New York comes in a case initiated by the Justice Department in 1998. The case concerns rules instituted by both card associations that say if a member bank also issues a credit card through American Express, it must leave the Visa or MasterCard networks. The government argued, and the trial court ruled, that the rules stifled competition.
After the Thursday hearing, it could take months for the appellate court to issue a ruling, which itself could be subject to appeal to the Supreme Court. But if the trial court ruling is eventually upheld, it could erode Visa’s and MasterCard’s share of the credit-card market. American Express has indicated its intention to approach banks about issuing American Express credit cards, something it has been doing for several years in Europe.