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The fact that several large banks have agreed recently to dedicate almost all their credit cards to the Visa line could complicate the Department of Justice’s antitrust case against Visa International and MasterCard International. In the past month, San Francisco-based banks such as Wells Fargo & Co. and Providian Financial Corp., as well as Dallas-based Associates First Capital Corp., and FleetBoston Financial Corp. of Boston, have entered into pacts, agreeing to dedicate at least 80% and as much as 90% of the volume of their credit card business to Visa, according to officials familiar with the deals. The report that Wells Fargo would devote most of its cards to Visa came out last Wednesday during the antitrust trial in federal court in Manhattan. The government is charging San Francisco-based Visa U.S.A., its parent Visa and Purchase, and N.Y.-based MasterCard with engaging in anticompetitive business practices that also stifled innovation in the credit card business. Specifically the government alleges that the two credit card giants used their intersecting corporate structures and exclusionary rules to dominate 75% of the U.S. credit card business. Visa and MasterCard are nonprofit associations controlled by the same large banks whose representatives simultaneously serve on the board of one and on important committees of the other. Each of these banks issues significant numbers of Visa and MasterCard cards. This overlapping ownership and governance structure, that the government claims violates antitrust laws, is known as “duality.” By having representatives of the same banks sit on the boards or committees of both Visa and MasterCard, the two credit card companies essentially agree not to compete, DOJ alleges. The government wants U.S. District Court Judge Barbara Jones, who is presiding over the bench trial, to block any bank not dedicated to Visa from exercising any direct governance in the card company. The agency also wants the judge to issue a similar ruling in regard to MasterCard. In addition, DOJ wants to stop Visa and MasterCard from continuing their policies and rules that keep other credit card networks such as American Express Co., from entering into agreements with the banks that already issue Visa and MasterCard cards. “The government wants dedicated boards of 80% and the [new] agreements move beyond that,” said Visa spokesman Kelly Preston. The new deals weren’t made to offset the Justice Department’s antitrust case, Mr. Preston said. “It’s nothing other than good business practice,” he said. Copyright (c)2000 TDD, LLC. All rights reserved.

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