Justice Department Probe Raises Fears That Card 'Duality' Will Now Be

Community bankers are worried the Justice Department has decided to overturn a policy that allows them to offer both MasterCard and Visa products.

Writing last week to Acting Assistant Attorney General Joel I. Klein, Independent Bankers Association of America executive director Kenneth A. Guenther said he left a recent two-hour meeting with prosecutors convinced that the Justice Department is ready to overturn the policy, known as "duality."

"I am very concerned and troubled about the outcome of this investigation and the harmful impacts of the proposed solutions that arose during the meeting," Mr. Guenther wrote in the May 29 letter. Eliminating the policy "will not measurably increase competition and most definitely will not result in better products or lower pricing for American consumers."

Justice Department officials declined to comment. "Our investigation is continuing," a department spokeswoman said.

The antitrust probe began last year when American Express complained that Visa and MasterCard were illegally preventing member banks from entering partnerships with the financial services giant.

Community banks are particularly worried about the antitrust probe because they are among the biggest winners under the current system.

These banks issue both Visa and MasterCard products, which are well- known brand names accepted throughout the world. They collect significant fee revenue, but do not have to worry about MasterCard or Visa trying to cross-sell financial services to the bank's customers.

That would change if the Justice Department overturns the policy allowing banks to offer both cards or if it rules that MasterCard and Visa must allow member banks to offer American Express cards.

Under the first scenario, community banks would risk losing customers who were unhappy with the card brand the bank decided to retain. In the second scenario, American Express could cross-sell mutual funds and other products to the bank's customers.

Visa spokesman Kelly J. Presta said the company does not know when the investigation will be over. "They have given us no indication of any course of action that they might take," he said. "We just continue to have dialogue with them."

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