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State Credit Card Probe Underway

Antitrust: California may be part of Visa, MasterCard investigation, sources say.

April 10, 1998|From Times Staff and Wire Reports

California and four other states are apparently investigating alleged antitrust practices in the credit-card industry, taking their cue from a nearly concluded 18-month Justice Department probe, two people familiar with the probe told Bloomberg News.

The states, like the federal investigation, are reportedly focusing on Visa USA Inc. and MasterCard International rules that bar member U.S. banks from offering competing credit cards from rivals such as American Express Co. and Dean Witter, Discover & Co.

Antitrust officials in California, Ohio, Maryland, Massachusetts and New York are taking part in the probe, the sources said. Representatives of Visa are scheduled to talk with the state officials on Tuesday in a conference call.

Kelly Presta, spokesman for San Francisco-based Visa USA, confirmed that company officials have scheduled a Tuesday call with representatives from an unknown number of states, but he declined to confirm whether California is among them.

Presta said Visa initiated the idea for the conference call because company officials had learned that "several states had expressed an interest in the credit-card industry." Presta, however, said he could not be more specific about the nature of the states' interest.

MasterCard, he said, would not be part of the conference call.

Bill Maile, a spokesman with state Atty. Gen. Dan Lungren's office, said he could neither confirm nor deny whether California has begun an investigation of Visa or MasterCard, or whether state officials planned to participate in Tuesday's call.

Maile did confirm, however, that California has not initiated any legal proceedings against either company. Meanwhile, Justice Department spokesman Michael Gordon said federal investigators have had discussions with officials in an unknown number of states about its probe into the companies' practices, but he said he didn't know whether California was among them.

Gordon also said he didn't know how close federal officials were to wrapping up their investigation or whether the department planned to file any charges.

The Wall Street Journal, however, has reported that Justice Department investigators have recommended that antitrust charges be filed against Visa and MasterCard, alleging that their joint control by the same banks and their rules violate federal laws. Lawyers for Visa have been asked to meet with federal officials in May, the Journal said.

MasterCard, the world's second-largest credit-card issuer, said it hasn't been contacted by any state agency on the matter. "We have always and will continue to cooperate with Justice Department queries or other investigations that may arise," MasterCard spokeswoman Glennis Wohlridge said.

Rivals of Visa and MasterCard want to break the industry leaders' grip on the market for credit cards issued by banks. Visa has banned member banks from offering American Express or Discover cards since 1991, while MasterCard decided last June to let regional banks impose similar restrictions.

American Express shares rose to a record high on news of the recommendation. The stock surged $3.25 to close at $107.06 in NYSE trading.

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