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Chapter 16
Antitrust Policy and Business Regulation

Start Up: The Plastic War
The $2.5 trillion market for credit and debit cards received a major jolt in
2004 when the U.S. Supreme Court let stand a lower court ruling that Visa
and MasterCard had violated the nation’s antitrust laws by prohibiting
banks who issued Visa and/or MasterCard from issuing Discover or
American Express cards. The court found that, rather than competing with
each other, Visa and MasterCard had cooperated with each other by
increasing their “intercharge fees,” the fees credit card companies charge
to merchants who accept credit cards for payment, in lock-step. And, by
locking Discover and American Express out of many markets, Visa and
MasterCard were guilty of anti-competitive behavior.
The court’s ruling spelled major trouble for Visa and MasterCard. Under
U.S. law, a competitor that has been damaged by the anticompetitive
practices of dominant firms can recover triple the damages that actually
occurred. Rivals Discover and American Express filed suits against Visa
and MasterCard. In 2008, American Express reached an agreement with
MasterCard for a settlement of $1.8 billion. That followed a 2007
settlement with Visa for $2.1 billion. Together, the two agreements
represented the largest judgments in America’s antitrust history.
Discover’s $6 billion suit was still pending in mid-2008. [1] The

Attributed to Libby Rittenberg and Timothy Tregarthen
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