To the Editor:

Matthew Cantor and Jeffrey Shinder, two lawyers who were part of the legal armada that sued Visa and MasterCard on behalf of merchants and Discover, suggest that banks should take a long view of payment card economics in evaluating payment card rules and practices ["Taking Long-Term Antitrust Potential Seriously," Nov. 26].

They also advise banks to seek advice from independent lawyers to review any advice they get from Visa or MasterCard.

No one can dispute the importance of evaluating any business practice with a long-term perspective. What is quite in dispute, however, is the suggestion that either the banks or the payment card networks have run their businesses solely with a view to short-run profits or that the banking institutions whose representatives were members of the MasterCard board and approved the interchange and other policies of the networks were not receiving plenty of independent advice from their own counsel.

By way of full disclosure, my firm and I represented MasterCard International's board of directors in the period leading up to the MasterCard initial public offering in order to render independent advice to the board with respect to the antitrust implications of the then-proposed initial public offering. Our role was to help the board design a structure for "new" MasterCard that would insure, to the greatest possible extent, that it was free to engage with its customer financial institutions in precisely the type of long-term strategic collaboration that Mr. Cantor and Mr. Shinder advocate — without the lingering concern that the result could be held to be a horizontal conspiracy that was per se unlawful under the antitrust laws.

On Nov. 25, just one day prior to the publication of Mr. Cantor and Mr. Shinder's article, the U.S. District Court for the Eastern District of New York handed down an opinion vindicating that effort by rejecting a complaint by merchants that the MasterCard public offering was a "pretext" or that it preserved bank control of the company.

MasterCard and its member banks had and have plenty of lawyers advising them. In addition to MasterCard's general litigation and corporate counsel, my firm was hired by the board because they wanted independent advice specifically on the antitrust implications of their contemplated transaction.

Though I agree with Mr. Cantor and Mr. Shinder that everyone involved in the payment card industry should seek independent advice when confronting difficult issues of antitrust law, I disagree that they have failed to do so. Indeed, in my own experience, I found that individual directors of the "old" MasterCard board routinely sought such advice and requested that my firm and I consult with their counsel about the plans they were considering.

I also dispute the suggestion that banks have looked only to short-run economics in making decisions about matters such as interchange or rules such as "honor all cards," both of which were mentioned as examples. The economics of debit and credit cards — so-called "two-sided" markets — are extraordinarily complex. But I have never met anyone in the banking world who failed to grasp the importance of insuring the ubiquity of card acceptance by merchants as a means of assuring the attractiveness of their payment cards to consumers.

In a marketplace as complex as the worldwide payment card industry, anyone with a short-run profit motivation cannot expect to survive. Bank card systems have, over the years, through experimentation and careful study, designed a system and a product that is accepted and used billions of times a day by consumers and merchants in virtually every corner of the world. That does not happen by accident, nor does it result from short-run planning.Stephen M. Axinn
Partner
Axinn, Veltrop & Harkrider LLP
New York

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