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Justice Sues To Block Citicorp Deal

July 27, 1998

WASHINGTON (AP) _ The Justice Department sued on Monday to block Citicorp Services Inc. from acquiring Transactive Corp.’s electronic benefit transfer system used by state and local agencies to provide food stamps and cash benefits to millions who qualify for welfare payments.

Citibank is now the dominant provider of such transfer services in this country, and Transactive is the major competitor.

Justice Department officials said that unless the proposed acquisition is blocked, competition for such transfer services would be eliminated, resulting in lower quality services for state and local agencies, as well as for those who receive welfare services.

The benefit transfer systems use a card that accesses accounts electronically. By eliminating paper, such as stamps or checks, the transfer systems are more efficient, lower the cost of providing the services and help reduce fraud.

Federal law requires all states to use the electronic benefit transfer systems to deliver food stamp benefits by the year 2002. Governments could save $1 billion over five years after all states have put the systems into effect for food stamp distribution, according to Justice estimates.

``Citicorp’s move to acquire Transactive would virtually eliminate competition in the market for delivery of EBT services,″ said Joel Klein, assistant attorney general of the department’s antitrust division.

According to the complaint filed in U.S. District Court in Wilmington, Del., Citicorp Services Inc., a wholly owned subsidiary of Citicorp Inc., headquartered in New York, agreed to acquire from Transactive Corp. and its parent GTECH Holdings Corp., which is headquartered in West Greenwich, R.I., contracts to deliver the transfer services to the states of Texas, Illinois and Indiana and Sacramento County in California.

The agreement also contains a provision that would prevent Transactive from competing against Citicorp for new contracts or licensing its processing system to another vendor in delivering the electronic transfer systems.

As of March 1998, Citicorp had a market share of 62 percent of the food stamp caseload and Transactive had 17 percent.

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