The immaturity of the electronic benefits transfer business did not stop the Department of Justice from trying to nip a perceived monopoly in the bud.

Filing a lawsuit this week to block an acquisition by Citicorp, the department's antitrust division sent another strong signal that the transaction processing industry, if not banking as a whole, is in its enforcement sights.

It picked big targets. It wants to prevent the No. 2 bank holding company from buying a subsidiary of Gtech Corp., whose claim to fame is as the leading processor of state lottery programs.

But the acquisition price of $11.5 million is hardly in the league of Citicorp's proposed $70 billion merger of equals with Travelers Group. And EBT, the business of converting food stamps and other entitlements to automated tellers and other electronic delivery systems, is just emerging from its developmental stages.

In the complaint filed Monday in U.S. District Court in Wilmington, Del., the Justice Department said the takeover of Gtech's Transactive Corp. would violate the Sherman and Clayton antitrust acts, reducing competition and diminishing the likelihood that state governments could get "the highest quality and lowest cost."

"It doesn't surprise me," said David B. Lipkin, a partner and electronic funds transfer lawyer at Drinker Biddle & Reath, Philadelphia. The sale would create "a monopoly for all practical purposes."

Citibank EBT Services, a unit based in Chicago, would be taking its closest competitor out of play. Citibank is a prime contractor in 29 states, Transactive in four others.

Citibank issued a statement putting EBT in the context of the debit card market, of which its share is 2%. "There are numerous providers eligible to compete for electronic funds transfer projects both with governments and private entities," said a spokeswoman.

Gtech vowed "to vigorously contest the action" and proceed with the divestiture, which would make it the latest of several firms to flee the EBT business.

That would leave Deluxe Payment Systems Inc. of Milwaukee and a few smaller competitors. Deluxe operates in seven states but handles less volume than Transactive, which has the biggest piece of business to date, in Texas.

Austin, Tex.-based Transactive was formed in 1994 and suffered significant losses in Texas. Its per-case revenues slid as the Texas caseload fell to 1.6 million this year, from 2.7 million in 1994.

Transactive struck the agreement with Citicorp in February and had anticipated transferring its contracts by November.

Michael R. Harris, senior vice president of the Atlanta consulting firm Speer & Associates, said that without Transactive "there won't be a level playing field. It's not level now" and the costs of new market entry are prohibitive.

"I am concerned with the number of potential offers that may bid on my business," said Rosemary Thomas, EBT project director for Maryland, which is currently re-bidding its Deluxe contract.

Justice, meanwhile, has added to an antitrust caseload that includes examinations of every major banking merger, a long-term inquiry into MasterCard and Visa prices and policies, and a high-profile dispute with Microsoft Corp.

Experts in banking law did not see a connection between the EBT case and merger issues.

"They are not cracking down," said H. Rodgin Cohen, a partner at the New York law firm Sullivan & Cromwell.

Donald I. Baker, a partner at the Washington firm of Baker & Miller and Justice's antitrust division chief in the mid-1970s, said the Transactive case differs from bank mergers because it involves a highly specialized business segment with few competitors.

Justice is loath to allow mergers in such specialized niches, he said, because they can quickly turn monopolistic.

Still, these experts said continuing consolidation raises the risk of enforcement actions.

"Where you acquire direct competitors, there are clearly going to be some antitrust issues raised," said Barry A. Pupkin, a partner of Squire, Sanders & Dempsey in Washington. "If competition is diminished, the government will stop the merger."

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