NTU rips federal role in MasterCard/Visa/AmEx Court battle

Prepared by the National Taxpayers Union

Edited by Bob Arguero, Managing Editor, GovCon

On July 11, as testimony from the government's witnesses in the antitrust case against Visa and MasterCard entered its final phase, the 300,000-member National Taxpayers Union (NTU) called upon federal officials to stop "mauling the marketplace" by ending their involvement in the ongoing feud among credit card companies.

"Like a bully punching his way across a playground, federal antitrust policy is mauling its way across the marketplace," said NTU President John Berthoud. "The government's case against Visa and Mastercard has the same troubling signs for taxpayers as the ill-founded foray against Microsoft."

While spending the money of hard-working American taxpayers, the facts show that government's case against Visa and MasterCard does not add up.

• Protecting Competitors, Not Consumers. American Express (AmEx), which encouraged the Visa/Mastercard (Visa/MC) suit, worked closely with federal prosecutors in bringing these cases to avoid expensive private litigation. A survey of consumer web sites such as Public Citizen's shows that there is little concern among consumers about competitiveness of the credit card market. A record 47.9 million AmEx cards are now circulating.

• Dubious Proof of "Harm." Although AmEx has complained of being denied access to new customers, in fact the firm has successfully distributed tens of millions of its products. Evidence suggests that poor business decisions — for example, high annual fees, lack of affinity programs, the failed "Optima" card, and a closed network — contributed to the loss of market share that AmEx now appears to be recovering.

• Government's Case Rendered Moot. Visa and MasterCard have already won a decision to prevent member banks from issuing AmEx cards. Meanwhile, for the first quarter of 2000, AmEx reported a record 14 percent jump in profits versus the same period in 1999.

Since the early 1990s, NTU has taken an active role in monitoring the public sector's increased use of litigation, rather than overt taxation or regulation, as a tool to tighten its grip on the private sector.

NTU to create a reform group
Faced with additional waves of antitrust suits on the horizon, Berthoud said his group will create an ongoing "Reform Caucus" aimed at uniting taxpayers, businesses, legal experts, and lawmakers behind a more focused and restrained antitrust policy.

"In the past three years alone, government has extorted twice as much in antitrust fines from businesses as it did from 1996 back to 1890, when the Sherman Act was created," Berthoud observed. "This is a growth industry that America's economy, not to mention America's taxpayers, can do without. Taxpayers are tired of footing the bill for overzealous trustbusters serving the interests of competitors instead of consumers."

"When the government comes to rest, its time to give taxpayers a break and put this case to an end once and for all," Berthoud concluded.

NTU is a nonprofit, nonpartisan citizen group founded in 1969 to work for lower taxes, less wasteful spending, and accountable government at all levels. For more information, visit the NTU web site at http://www.ntu.org or call 703-683-5700.