Mastercard and Visa Will Halt Debit Card Bid

Visa U.S.A. Inc. and Mastercard International have agreed to terminate a national debit card venture to settle charges they conspired to dominate the market, a group of state attorneys general announced today.

An antitrust suit by 14 states claimed that because Visa and Mastercard members include virtually every major U.S. bank, their joint development of the so-called Entree debit card network constituted an attempt to create a monopoly in the emerging “point-of-sale” debit card industry.

A debit card can be presented at stores like a credit card, but the money is automatically deducted from the cardholder’s account and transferred to the merchant.

The suit, filed June 26 in U.S. District Court in Manhattan, alleged that Visa and Mastercard tried to undermine the debit card competition by gaining control of the nation’s two largest automatic teller machine networks.

The two networks, Cirrus System Inc. of Downers Grove., Ill., and Plus System Inc. of Denver, had been formulating their own plans for national debit card networks in the early and mid-1980s.

Visa also took over the Interlink Network, based in San Mateo, Calif., the nation’s largest regional debit card network.

Visa and Mastercard began developing Entree in 1986, but the venture has not yet begun operation.

Robert Abrams, New York state attorney general, said in a news release that the two companies had been engaged in a “creeping merger” that had already resulted in largely uniform pricing in the credit card industry.

“The two corporations have virtually the same members and rate structures,” he said. “With Entree, Visa and Mastercard would have taken the crucial step of jointly marketing a debit card, which most observers expect to be a dominant form of payment in the ‘cashless’ society of the future. This had to be stopped. . . . “

The states that filed suit were Arizona, California, Connecticut, Louisiana, Maryland, Massachusetts, Minnesota, New York, Tennessee, Texas, Utah, Washington, West Virginia and Wisconsin.

Under terms of the settlement signed today by U.S. District Judge Pierre N. Laval in Manhattan, Visa and Mastercard will abandon Entree and notify bank participants that it will be terminated by Oct. 1.