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A federal judge Tuesday refused to dismiss an antitrust case brought by 4 million merchants who claim Visa USA Inc. and MasterCard International Inc. force them to accept their debit cards. Eastern District of New York Judge John Gleeson also rejected a request by MasterCard for a separate trial to defend itself, clearing the way for jury selection to begin April 21 in In Re Visa/Mastermoney Antitrust Litigation, 96-CV-5238. The case, brought by Wal-Mart Stores Inc., Sears Roebuck & Co. and others, alleges the credit card giants illegally monopolized the debit card market by requiring merchants to accept their debit cards as a condition for continued use of their credit card systems. Gleeson’s 16-page opinion was a win for the merchants on their claims under the Sherman Act, 15 U.S.C. �� 1 and 2. But the judge also refused to grant the merchants’ summary judgment on the charge that the “tying arrangement,” alleged to have been orchestrated by the credit card organizations, was “per se” illegal. He found that it was an open question of fact whether MasterCard had “sufficient economic power” to warrant application of the per se rule. Gleeson said that a trial would be held on several issues, including “those that lie at the heart of the merchants’ Section 1 claims: whether Visa and MasterCard’s Honor All Cards rules harmed competition in the debit card services market, and whether the defendants acted together to produce that result.” The judge said there were “several unique features of this case — the relationship between the merchants and the defendants, the relationship between the defendants and themselves (and among their member banks), the nature of the tying arrangements, and the ultimate effects of these arrangements on consumers — that will benefit from further development at trial.” MasterCard and Visa argued that the merchants had failed to offer evidence tending to prove that they had “a conscious commitment to a common scheme designed to achieve an unlawful objective.” “I disagree,” Judge Gleeson said. “There is evidence, direct and circumstantial, from which a jury could find a conspiracy.” MasterCard had claimed that the antitrust laws do not recognize an illegal “conspiracy to attempt to monopolize.” But Gleeson said: “I find that the evidence of common ownership, a lack of competition, and incidents of concerted activity by the two defendants could permit a jury to conclude that MasterCard, along with Visa, is attempting to monopolize the relevant market.” And contrary to Visa and MasterCard’s argument that the relevant market is “all forms of payment,” Judge Gleeson said the “debit card service is a well-defined submarket characterized by an inelasticity of demand and universal recognition by the public, the parties and the industry as a whole,” adding that, “No rational jury could conclude otherwise.” MasterCard’s motion to sever, made with the support of Visa, argued that the jury might be confused and unable to weigh the evidence against each organization separately. “I see no reason why that would occur, or why a properly-instructed jury could not give both defendants a fair trial,” Gleeson said. Lloyd Constantine of Lloyd Constantine & Partners represented the merchants. Stephen Bomse of Heller Ehrman White & McAulliffe represented Visa. Kevin Arquit of Simpson Thacher & Bartlett and Kenneth Gallo of Clifford Chance represented MasterCard.

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