November 14, 2002 -- Statement by Noah Hanft, General Counsel, MasterCard International, Concerning the Release of Documents in the Merchant Antitrust Lawsuit

The release by a federal judge of certain documents in the long-running litigation between Master Card and retailers in the United States confirms that the merchants' suit against MasterCard's honor all cards policy and its debit program is without merit. The case is nothing short of an attack on the American consumer's ability to choose from the broadest possible range of payment services. The merchants seek to restrict consumers' choices, and to shift their costs of doing business to consumers.

In pursuit of those goals, powerful merchants like Wal-Mart and The Limited and others have misrepresented the facts and concealed evidence, as part of an effort to maximize their profits and attorneys' fees for their lawyers. A Payless senior executive was candid about that company's goals for this lawsuit, when he testified under oath that Payless 'would rather have the consumer carry the cost [of debit transactions than us, sure.' Payless also has admitted that MasterCard's debit program maximizes consumer choice and gives consumers 'more flexibility in making purchases. This is great news for consumers, but some retailers aren't too excited.'

In fact, MasterCard's Honor All Cards rule has substantially broadened the payment card options available to consumers. Consumers know that wherever they see the MasterCard logo they can be assured that the merchant will accept whatever type of MasterCard payment card the consumer wishes to use, whether it's a Gold credit card, a signature debit card, a co-branded airline card or a corporate card. Through this lawsuit, however, the merchants seek to secure for themselves the right to pick and choose which MasterCard cards a consumer may use, all in the name of maximizing the merchant's own profits.

Because they have no valid antitrust claim, the plaintiffs' strategy relies on distorting the case record. Plaintiffs claim, for example, that MasterCard and Visa have tried to prevent merchants from distinguishing between credit cards and debit cards, and they have therefore been unable to prompt consumers to use their PIN when paying with a debit card. In reality, during the same week that Wal-Mart authorized their counsel to file a complaint making that allegation, Wal-Mart was training its cashiers, instructing them that they can readily distinguish credit from debit, and prompt for PIN. Continuing its well-known history of discovery abuses in litigation, Wal-Mart initially claimed to have ‘lost' this video, as part of its blatant effort to conceal evidence. Likewise, an internal Payless document confirms that debit cards and credit cards are easy for merchants to distinguish, and testimony of a Sears executive admits that these cards are ‘readily distinguishable.'

The notion that MasterCard tried to suppress on-line debit flies in the face of reality. In fact, the documents released by the Court reflect that MasterCard has been a steadfast supporter of PIN-debit for the last decade and thus has contributed to the enormous growth of both PIN-debit transaction volume and the PIN-debit networks that process these transactions. Newly-released deposition testimony from regional network executives such as MAC, Pulse and Shazam confirms that MasterCard was not undermining the networks but in fact touts the fact that these rivals ‘had a great working relationship with MasterCard.' As one regional network executive put it, MasterCard was ‘more partner than competitor.' When coupled with MasterCard's willingness to permit the inclusion of rivals' marks on MasterCard debit cards, this proof eviscerates plaintiffs' claim that MasterCard was somehow suppressing PIN-debit. Indeed, PIN-debit networks have approximately three times the debit volume of MasterCard, as these networks have a 40% share of all point of sale debit transactions and MasterCard has only a 14% share.

In an effort to bolster their phony case, the retailers also claim that MasterCard's and Visa's rules prevent them from steering customers to another form of payment when they present a MasterCard or Visa signature debit card for payment. This claim is false. In fact, on March 13, 1995, more than a year before they filed their complaint, a MasterCard executive wrote a letter to Wal-Mart advising it to invest in PIN-pad technology to take advantage of the lower interchange fees for on-line debit. Sears is known for its aggressive ‘May I' program, through which it attempts to steer every consumer to use their Sears card instead of any other form of payment, including a MasterCard or Visa card. Moreover, executives from Safeway and other merchants have testified that MasterCard and Visa have never prevented them from steering consumers to other payment forms and they do so routinely.

The trumped-up nature of retailers position is further demonstrated by their allegation that MasterCard is somehow conspiring with bitter rival Visa to monopolize debit. Plaintiffs are fully aware that these allegations of conspiracy were squarely rejected by a federal court in the 2000 trial of the Department of Justice's case against MasterCard and Visa, where the Court ruled that the two ‘compete vigorously.'

Finally, this case is equally about the interests of class action lawyers. As one member of the merchant class stated in a court submission: ‘This lawsuit is ridiculous and should not be allowed to go further. It just makes lawyers rich and doesn't help anyone.'