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States Propose Settlement in Suit Against Visa and MasterCard

September 28, 1989

NEW YORK (AP) _ Thirteen states on Thursday offered to settle an antitrust lawsuit involving a joint venture by Visa and MasterCard to develop a national debit card.

The lawsuit, filed June 26 in U.S. District Court in Manhattan, alleged that Visa and MasterCard conspired to prevent other companies from introducing a national debit card by dragging their feet in bringing out their card.

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

″I think there is a unique opportunity for a settlement in this case now,″ said Lloyd Costantine, the chief of the antitrust unit of the state attorney general’s office in New York.

Costantine, who spoke on behalf of all the states who brought the complaint, made the settlement proposal at a scheduling conference before Judge Pierre Leval.

Lawyers for Visa U.S.A. Inc. and MasterCard International Inc. said they were willing to discuss the offer.

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

The lawsuit charged that the companies undermined competition through the joint venture, called Entree, and by gaining control of the nation’s two largest automatic teller machine networks.

The two ATM 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, the complaint said.

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

The settlement offer calls on Visa and MasterCard to drop the Entree venture. In exchange, the states will drop their efforts to compel Visa and MasterCard to divest from Cirrus, Plus and Interlink.

Costantine said the settlement would allow Visa or MasterCard to separately develop a national debit card.

However, he said, the states want a provision that a person who is a credit card-holder of both Visa or MasterCard have a debit account with only one of the companies.

Costantine said the states decided to offer a settlement because Entree was not yet on the market and because they felt the companies had no intention of putting the national debit card in operation.

Visa and MasterCard signed an agreement in 1987 to develop Entree jointly.

After hearing Costantine’s offer, Leval agreed to postpone until Nov. 6 the Oct. 4 date previously set for Visa and MasterCard to respond to the lawsuit.

Visa attorney Barry Brett and MasterCard lawyer Stanley Robinson said they would discuss the settlement offer with the states in the meantime.

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