In the final day of defense arguments in the Visa/MasterCard antitrust trial, MasterCard's sole expert witness said that the Justice Department's proposed changes to the credit card industry could mean the end to dual issuance, something the government itself has called pro-competitive.

Economics professor Robert S. Pindyck of the Sloan School of Management at Massachusetts Institute of Technology testified Tuesday that if the government succeeds in ending dual governance - the system that lets banks sit on the board of one card association, but issue a substantial portion of their credit cards under the brand of the rival association - dual issuance would also come to an end.

The Justice Department submitted its proposed remedy to Judge Barbara S. Jones two weeks ago. It calls for banks that sit on the board of directors of a card association to issue all of new cards under that brand. Banks that do not govern an association would be able to issue all brands, including American Express and Discover, and witnesses for the card associations argue this privilege would put the banks with board seats at a disadvantage, and could prompt them to resign.

The trial is now in recess until Oct. 16, when all sides are scheduled to make their closing arguments. Both MasterCard and Visa have expressed shock at the "severity" of the Justice Department's proposed remedies.

Under friendly questioning from MasterCard lawyer James C. Egan, Mr. Pindyck said the government's solution would reduce competition and damage the credit card industry.

It would "impose very heavy costs on a bank that wants to be a governor," he said. Such a bank "would have to give up duality. That bank wouldn't be able to play the associations off each other."

Mr. Pindyck said that in many cases, large banks would decide not to sit on an association board; that would create a situation where the associations' major "players" would not have roles in setting strategic direction and business practices. Smaller banks would choose to govern, he said, and that would be the "beginning of the end to duality of issuance."

In keeping with the position that MasterCard has expressed throughout the trial, Mr. Pindyck said that if issuers were forced to choose one association over the other, MasterCard would generally lose out, because it is the smaller and less prominent of the two.

"More issuers would choose Visa, and it might be the end of MasterCard," he said.

In cross-examination, prosecutor M.J. Moltenbrey sought to poke holes in the oft-stated idea that MasterCard would disappear.

"If you look at all the banks on the board of directors of Visa and MasterCard, and you look at what their transaction volume is that have chosen to go with Visa and with MasterCard, it is about 50-50," Ms. Moltenbrey said.

Mr. Pindyck said he had not seen statistics about the transaction volume of the board banks. Even so, he said, "these membership agreements have outs." If a bank finds that its customers migrate toward Visa, for example, it could drop its membership in MasterCard. "It's not the same thing as 100% exclusivity, where you have to move by mandate," Mr. Pindyck said.

Ms. Moltenbrey said that under the government's proposal, if a bank is unhappy with one association it would be able to leave the association board and issue any card it wants.

She also pointed to testimony from bankers, who expressed differing views on what they valued. Some cared greatly about having a role in association governance, while others were more interested in issuing multiple card brands. Therefore, she said, the future under the government's scenario would mean that banks would choose all kinds of options, thus distributing evenly the number and size of banks on each board.

Ms. Moltenbrey questioned Mr. Pindyck about how the government's fix would harm consumers, and indicated that MasterCard seemed concerned only with how it would hurt MasterCard.

Mr. Pindyck replied, "If this remedy went through, there would be considerable harm to the two networks, their ability to compete with each other, and that would hurt competition between the associations and with Amex and Discover. That would in turn create harm to consumers."

In Mr. Pindyck's direct testimony - which, as with the other expert witnesses, was not heard in open court - he said there was no evidence that MasterCard wielded "monopoly power," a factor in most antitrust cases.

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