Visa and MasterCard: A Pair of Plastic Thieves?

It's easy to think of America's two major credit card companies as competitors in a classic tradition: Yankees vs. Dodgers, Coke vs. Pepsi, Visa vs. MasterCard. But according to the Department of Justice, that sheen of rivalry may be little more than a carefully maintained illusion. After examining Visa and MasterCard's overwhelming presence in the American financial market (the companies issue roughly 75 percent of the country's credit cards and enlist about 7,000 banks), DOJ lawyers have brought monopoly charges against the credit peddlers. In a case opening Monday in New York's District Court, the Justice Department will make a case that the card companies are in fact one monopolistic presence; according to the suit, Visa and MasterCard crush competition by blacklisting banks who offer cards from other networks. That means any bank brave (or foolish) enough to send customers cards emblazoned with an American Express or Discover logo may find itself effectively frozen out of industry decision-making operations.

Of course, if you ask most retailers, it's not just banks that are kept under the companies' collective thumb. Most American consumers are familiar with the tag line for Visa's advertising campaign touting the company's omnipresence: After describing some tantalizing vacation spot, hotel or safari, the voiceover intones, "And they don't take American Express." The merchants in question, according to MasterCard and Visa detractors, don't take American Express (or anyone else's card) because they're under considerable pressure not to. In a class action lawsuit distinct from the DOJ case, 4 million retailers have joined in a suit against the companies, charging undue market control. Visa and MasterCard have a lot to lose as these cases progress: At the moment, the companies are on the take at both ends, charging credit card customers sky-high interest rates and leveling a sizable usage charge against retailers. Of course, if the store owners decline to take credit cards, they stand to lose considerable business from a public that has come to expect everybody to accept plastic payment.

In the end, despite the grim realities of Visa and MasterCard ubiquity, there could be a silver lining in all this for consumers. While the DOJ case could take most of the summer to unfold, the cumulative effects of such intense negative media scrutiny could become apparent much more quickly — Visa and MasterCard customers should keep an eye out for peace offerings (in the form of lowered monthly interest rates or other acts of magnanimity) over the next few months.