Monday, April 28, 2003

Antitrust news

Jury selection begins today in Brooklyn, New York, in an antitrust case pitting more than five million retailers against Visa USA. The retailers claim Visa's insistence that stores whch accept Visa credit cards must also take Visa debit cards violate antitrust laws. Specifically, the retailers are upset because Visa debit cards require signatures, a practice which costs the merchants more than accepting cards which only require a PIN number.

The lawsuit, first filed in 1996, also named MasterCard International as a defendant, but this morning the judge presiding over the trial announced MasterCard reached an "11th hour settlement" with the plaintiffs. U.S. District Judge John Gleeson ordered the settlement sealed while Visa goes to trial, so the terms of MasterCard's surrender are unknown. Still, it's reasonable to infer the MasterCard settlement is a good sign for Visa, especially considering Judge Gleeson has given the plaintiffs a relaxed burden of proof. According to Bloomberg News, Gleeson "ruled earlier this month that they don't have to prove that credit and debit cards are separate products, a key requirement to establish their antitrust claim. He also said Visa's credit-card market share was so large that one could infer it could force merchants to take an unwanted product."

Of course, "force" doesn't actually mean force. It's doubful the retailers will introduce evidence Visa officials put a gun to anyone's head to make them accept debit cards. Especially given that the plaintiffs include Wal-Mart, the world's largest retailer, it's hard to believe any of the plaintiffs suffered a true injury. But in the context of antitrust, simply possessing economic power is sufficient. The jury is unlikely to hear much about the difference between economic and political power, i.e. the difference between a true monopoly (such as the U.S. Postal Service) and a successful corporation like Visa. And given the recent string of antitrust jury verdicts, Visa seems certain to lose at trial. Thankfully any appeal will be heard by the New York-based U.S. Court of Appeals for Second Circuit, a tribunal that has a decent track record of rejecting novel and meritless antitrust claims.

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