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Appeals Court Deals Setback to Largest ATM Network

April 24, 1996

WASHINGTON (AP) _ Federal regulators should have given opponents a chance to fight before allowing the nation’s largest automated teller network _ MAC _ to get even bigger, appeals judges ruled.

In a 2-1 decision Tuesday, a panel of the U.S. Circuit Court of Appeals vacated a Federal Reserve Board order allowing MAC’s owners to buy a smaller rival.

Melinda Mercurio, spokeswoman for Electronic Payment Services, the banking joint venture that owns the MAC network, said the court’s decision changes nothing ``at this point.″

``They did not say that the (board’s) decision was incorrect, simply that more information was needed,″ she said.

MAC’s expansion was contested on the grounds that it would give one company 45 percent of Ohio’s automatic teller machines and increase its already-dominant positions in Pennsylvania and Kentucky.

Writing for the majority, Circuit Judge Patricia M. Wald criticized the Fed’s fast-track approval ``without an adequate evaluation and explanation of the public benefits.″

Wald and Judge Karen LeCraft Henderson concluded the Fed overlooked the ATM giant’s responsibility to demonstrate that the benefits of an acquisition ``would outweigh the possible adverse effects.″

Electronic Payment Services already operates America’s largest ATM network by volume: nearly 100 million transactions a month.

The Federal Reserve Board last year approved its bid to acquire the smaller MoneyCenter network of National City Corp.

Another bank-machine competitor, Columbus, Ohio-based Money Station Inc., contested that action.

Money Station convinced the appellate judges to vacate the board’s order and require board governors to ``at a minimum″ hold an evidentiary hearing.

``It’s very unusual for something like this to happen,″ said Stephen Landes, Money Station’s general counsel.

``The opinion was more than a technical argument. There were serious doubts raised about the merits of the (Federal Reserve Board) decision.″

If the court’s action doesn’t lead to a reversal of the MAC-MoneyCenter merger, it will at least delay it by half a year or more, Landes estimated.

The proposed merger would give MAC one less competitor and eliminate any possibility of another, smaller network merging with MoneyCenter ``to create a viable competitor to MAC,″ the opinion said.

In his dissent, Chief Judge Harry T. Edwards called the decision bad precedent.

The Fed was justified in the way it handled the proposed merger, he wrote, and ``The result here is a wonderful windfall for Money Station and its attorneys, who now get to continue this litigation over nothing,″ he wrote.

Edwards characterized Money Station as a sore loser getting a court-ordered opportunity ``to whine over its disfavored position in the market.″

Since adding the machines of its former competitor, MoneyCenter, last year, MAC now has 19,400 ATMs, according to Mercurio, EPS director of communications.

In the most recent survey by the industry newsletter Bank Network News, dissident rival Money Station reported having 4,409 ATMs as of September 1995.

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