WASHINGTON -- The banking industry can expect more U.S. Justice Department investigations of electronic banking networks and their mergers, Deputy Assistant Attorney General Robert Litan said Thursday.
The scrutiny, evident in the department's recent settlement of an antitrust case against the operator of the MAC automated teller machine network, results from the Clinton administration's greater emphasis on civil cases and monopolistic practices, Mr. Litan said.
He said the focus on banking and payment services could extend to the credit card industry and its transaction processing.
Two acquisitions announced Wednesday -- First Data Corp.'s $680 million deal for merchant processor Card Establishment Services Inc. and MasterCard International's letter of intent to buy the Missouri-based BankMate ATM network -- appeared to raise Mr. Litan's eyebrows.
But when pressed in an interview about specific responses by Justice's antitrust division, Mr. Litan was noncommittal. He did say the agency has taken a special interest in Dean Witter Discover & Co.'s litigation to gain membership in Visa U.S.A. Visa recently won an appeals court ruling that allows it to bar, Dean Witter.
"All I can say is, we are watching that industry closely," Mr. Litan said.
While it may not yet be on Justice's front burner, the First Data-CES deal is the talk of the merchant processing side of the credit card business, which is dominated by a few large players with economies of scale.
First Data, by far the largest nonbank processor of MasterCard and Visa cardholder accounts, is buying what is by most measures the third-largest of the merchant business' top three, behind Nabanco and National City Processing Co.
First Data, which already does a sizable merchant business on a private label basis for its bank clients, cannot formally complete the transaction for at least six to eight weeks. Besides having to file to issue stock, the Hackensach, N.J.. company has to be cleared under the Hart-ScottRodino Act, which requires an evaluation of competitive effects.
First Data does not expect to run into difficulty with the Justice Department or the Federal Trade Commission, which share antitrust jurisdiction. The FTC has already been on First Data's case -- it examined the company's ultimately losing bid to acquire Western Union Financial Services.
The winner of Western Union was First Financial Management Corp. of Atlanta, the parent of merchant processing giant Nabanco.
Roger Peirce, president of First Data's Electronic Funds Services division, argued that its takeover of CES will boost competition. First Data is positioning CES as a vehicle to help banks control merchant relationships while competing more effectively against full-service transaction processors like Nabanco.
"This is procompetitive compared to the alternative -- the concentration of merchant business in a few processors, which has been happening at an incredible pace," Mr. Peirce said in an interview this week.
Mr. Peirce conceded that First Data may have some explaining to do.
"There will be people who have their own design on preserving a concentrated market who won't be happy with this," he said.
Mr. Litan, speaking before a joint meeting of the Electronic Funds Transfer Association and National Automated Clearing House Association, said U.S. authorities are looking primarily at ATM networks for now. He said Justice will be concerned about elimination of competition when ATM networks in the same region merge.
It could also oppose interregional mergers when the acquiring company might have entered the market by other means, or if the merged company "forecloses competition" from an existing provider.
When asked about a national entity's acquiring a regional, as in MasterCard and BankMate, Mr. Litan said, "It's hard for me to comment. Thank you for alening me."