As MasterCard International portrays it, getting sued by the Justice Department on antitrust grounds is far less of an indignity than being constantly mentioned in the same breath as Visa, the larger credit card association.

"Our defense differs greatly from that of Visa, particularly on the duality issue," said Kevin J. Arquit, a lawyer for MasterCard. "As the smaller player, duality is extremely important" to MasterCard.

Indeed, MasterCard - which has roughly 25% of the market share in credit and debit cards, compared to about 50% for Visa - would seem to have a lot to lose if the government wins its case.

If banks were permitted to issue American Express cards, MasterCard would be more likely than Visa to get squeezed out of the marketplace. And if banks were required to swear fealty to one card brand, Visa's dominance might well sway their decisions.

While the government is not directly attacking duality, the policy that lets banks issue both the Visa and MasterCard brands, it is challenging dual governance, the policy that lets banks with strong ties to both brands sit on the board of directors of either one.

MasterCard says many of its board members already meet the government's proposed standard that at least 80% of their cards are issued under the MasterCard brand. But it also says it has been able to gain business by putting issuers whose primary allegiance is to Visa on the board. This advantage would go away.

If all MasterCard board members had 80% dedication, "would they make decisions any differently? No," Mr. Arquit said. Moreover, "I don't think Amex or Discover cares about the duality side" of the case.

More important to the nonbank card companies is whether Judge Barbara S. Jones, who is presiding without a jury over the case in U.S. District Court in New York, will issue a decision that would compel the associations to permit their member banks to issue American Express or Discover cards - or, conceivably, other brands as well. The president of Discover Financial Services Inc. and top executives at American Express have testified that their inability to tap U.S. banks has harmed their business.

Visa's bylaw 2.10(e), the central - and most contentious - rule that keeps the nonbanks out, is cited far more frequently at the trial than MasterCard's later and less restrictive rule, known as the Competitive Programs Policy. Perhaps the chief thing on which MasterCard and Visa's lawyers agree is that Amex and Discover are crying wolf.

"This is clearly a rule-of-reason case - you can't just show that conduct occurred. You have to show the effect," Mr. Arquit said. "Does [the Competitive Programs Policy] keep Amex from bringing its products to the U.S. public? Otherwise, it really doesn't matter why we did it."

Whether MasterCard and Visa are true competitors will be decided by Judge Jones, but at least on a superficial level, the two associations carry on like cats and dogs in a noisy show of one-upmanship.

Though Visa has the advantages in brand and market share, MasterCard is perceived as the more flexible of the two, and its willingness to cater to banks' specific needs has earned it new business from big card issuers, including Citigroup and Chase Manhattan Corp., two of the top four issuers.

While MasterCard is happy to join Visa in ganging up on a common enemy like American Express, it fears that its efforts at differentiation will get drowned in trial testimony that tends to treat MasterCard like the younger brother of Visa.

"The American Express witnesses often refer to MasterCard and Visa together, as if we act the same way," said Noah Hanft, deputy general counsel for MasterCard. "There is a historic difference between MasterCard and Visa in terms of duality and the way we deal with members generally."

In 1970 MasterCard was happy when one of Visa's member banks - Worthen Bank of Arkansas - sought to issue MasterCard cards as well. But Visa objected, and established a rule - bylaw 2.16 - that prohibited member banks from issuing cards from other networks.

That bylaw was later challenged in court. Though Visa won the right to continue enforcing the bylaw, the incident led to the introduction of duality in 1975. Visa has also tried to implement non-duality rules for debit and commercial cards.

As the Justice Department explained in its opening trial statement, the government favors dual issuance as pro-competitive, but it feels the opposite way about dual governance.

MasterCard contends that dual governance is as pro-competitive as dual issuance. By allowing dual governance, it has the chance to offer a board seat to an executive from a predominantly Visa-issuing bank, in the hopes of eventually winning the bank over to MasterCard, the association said.

MasterCard has tried to prove in court that if there had been a rule against dual governance, some of MasterCard's most loyal members - such as Household International, AT&T, and General Electric - would never have switched their business from Visa to MasterCard.

Mr. Hanft said: "When a new institution is involved in the governance of an organization, and they get to work with and understand its strategies, and the people, and the direction of the association, they will often support it."

The Justice Department says it is impossible to expect a bank to work honestly to increase the business of one organization when the bulk of its revenue comes from another.

During the government's investigation of MasterCard and Visa, both associations came out with partnership agreements for banks to sign: MasterCard's, which Chase Manhattan and Citigroup have signed, stipulates that the banks will move 80% of their portfolios to MasterCard within an undisclosed time period.

MasterCard also credits itself with opening its network to newcomers in the card business, such as AT&T and General Motors. MasterCard was willing to set up cobranding arrangements with these companies, and the programs became the envy of Visa.

MasterCard was the "haven for these new entrants," Mr. Hanft said. "Amex was doing its 'go-it-alone' strategy and did not embrace them." Neither did Visa, he said.

Though MasterCard positions itself as the more flexible bank card association, many industry observers say it is forced to do so because it is the underdog. Being the smaller card association puts MasterCard in a more fragile position if the Justice Department wins its case. Perhaps Visa could tackle American Express head on, but where would that leave MasterCard?

The trial testimony of Joseph W. Saunders, chief executive officer of Fleet Credit Card Services, revealed conversations he had with H. Eugene Lockhart, then CEO of MasterCard, discussing possible outcomes of the investigation. If Amex were given the right to work with banks, Mr. Lockhart feared MasterCard would not survive, Mr. Saunders said.

Mr. Hanft said those statements were made a while ago, when MasterCard was weaker.

"As we sit here today, MasterCard is stronger than it's ever been," he said. "We believe we will continue to challenge Visa, and the outlook is actually very bright for us. But it's a very competitive environment, and we are the smaller association.

"We have to be a little more nimble, a little more quick," Mr. Hanft continued. "We've been doing that, and we've been winning. But I don't think anyone can predict the consequences of shaking up a system that works so well."

MasterCard CEO Robert Selander, citing the litigation in progress, declined to talk for this article. But in a May 1999 interview with American Banker he said he spent "a reasonable amount of time" on the lawsuit.

"The Justice Department has alleged concerns about our competitive policy, and they've also basically said they don't like duality as it currently is structured and configured," Mr Selander said. "I have to tell you that both of those things are unfounded. I feel very comfortable in our positions, and I'm very frustrated as a taxpayer that I'm funding the government's attack on our industry, and we're running up huge legal bills in order to defend our practice."

As evidence of competition in the credit card industry, Mr. Selander said he personally got "80 to 90 solicitations a year" in the mail. "And they're not all MasterCard - yet. There's a lot of Visa, a lot of Amex, and a lot of Discover in my mail, and the variety of prices, offers, and cobrand partners is extremely rich. I am well served now, so I'm not sure what changes could possibly make it better."

Discussing public opinion of the trial, Mr. Selander said: "I see that increasingly, people are making comments - 'Where is the government going with this?' I certainly don't know where they're going with it."

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