Government policies in banking and other fields are tilting in favor of bigness, but not in consumer payment services.

While bank merger applications seem to encounter more difficulty with fair-lending hurdles than with older concerns about how much they will eliminate competition, the federal antitrust machinery is bearing down on systems that transfer money electronically.

Bankers and their lawyers are not too alarmed. They see little change in the truce that their joint ventures in credit cards and automated teller machines have long maintained with the federal arbiters of competition policy.

But a recent surge in legal and investigative actions threatens to turn up the heat, especially in card-related areas.

Automated teller networks provide the most immediate potential for sparks to fly. The Justice Department's antitrust division has already forced Electronic Payment Services Inc. to widen access to its MAC network.

The U.S. agency is studying the competitive implications of at least two other ATM-related transactions, one involving an ownership position in MAC, the other the pending merger of the NYCE and Yankee 24 systems in the Northeast.

Meanwhile, many credit card executives and antitrust lawyers are keeping an eye on the U.S. Court of Appeals for the 10th Circuit in Denver, which is about to rule on Dean Witter, Discover & Co.'s suit against Visa U.S.A.

The government is not directly involved in Dean Witter's attempt to become a Visa card-issuing member. But a Dean Witter victory, upholding an earlier verdict at a lower court, would call into question the Visa association's legal underpinnings.

Some lawyers - not just those friendly to Vise contend that if Dean Witter wins, it would throw such a wrench into the body of joint-venture law that federal antitrust authorities would feel compelled to intervene and try to fix it.

And there is a new, wild card in all of this: The Justice Department's antitrust division may not be the only agency helping to shape policy in payment ventures. The Federal Trade Commission's Bureau of Competition, through the recent settlement of a case involving First Data Corp., has served notice that it, too, is interested.

Even if the net result of all these cases is to reinforce or validate the current structure of consumer payment systems, these companies face more antitrust scrutiny than at any time since the 1970s, when banks went "dual" with MasterCard and Visa and forged the rules for ATM "sharing.

The Justice Department has been there all along. Its pronouncements on credit cards and ATM networks two decades ago, when Gerald Ford was President and Donald I. Baker was assistant attorney general for antitrust, are still viewed as landmarks.

Despite subsequent technological and competitive changes, Justice had little more to say on payment-system issues until recently.

The main reason is that during the Reagan-Bush years, antitrust went laissez faire.

When the Republican administrations did not take action against a joint effort by MasterCard and Visa to launch a debit card called Entree, several state attorneys general sued the associations in 1989 and successfully derailed the plan.

Lloyd Constantine, the New York assistant attorney general who spearheaded the Entree case and now has his own law firm in New York City, said the suit had its intended effect, and debit card competition is robust.

Like other critics of the Reagan-Bush antitrust approach, Mr. Constantine has kept a wary eye on other aspects of MasterCard-Visa competition. He said Visa's current moves away from duality, and MasterCard's legal settlement with Dean Witter while the latter's suit against Visa was pending, were positive signs of differentiation.

Donald Baker, who is in private practice in Washington after leaving Jones Day Reavis & Pogue, noted in a recent Regulation magazine article that credit card price competition is less vigorous in the United States than in Canada, where banks historically did not join both the MasterCard and Visa associations.

There are sure to be others of similar mind in Washington's current Democratic administration, though no one is talking about an inquiry or crackdown against duality or other established credit card practices. At least not yet. ATMs are on the front burner.

Anne K. Bingaman, the assistant attorney general for antitrust, and her deputy, Robert E. Litan, have willingly assumed the activist mantle.

Just as out-front as in some recent Community Reinvestment Act enforcements, Attorney General Janet Reno has spoken publicly about ATM-network access, and she convened the April 21 press conference to announce the consent decree by which Electronic Payment Services Inc. avoided a monopolization charge.

In the unlikely event Justice needs any prodding, it could come from the Federal Trade Commission. Either agency, or both, could then have bank networks in their sights.

Bank lawyers have not had the FTC on their radar screens. Anita Boomstein of Hughes Hubbard & Reed in New York, an expert on card and payments issues, said the Justice Department has made its jurisdictional prerogatives clear in banking-related cases, EPS/MAC being a case in point.

Mr. Baker, in an interview last week, also doubted the FTC would preempt Justice's traditional focus on banking, which is often in concert with the Federal Reserve Board.

FTC does have a one-time Baker protege, David A. Balto, in its policy and evaluation office. Mr. Balto is increasingly regarded as a top intellect on payment-services competition, and the recent First Data Corp. action may have been a shot across the industry's bow.

The commission announced a consent agreement Aug. 18 that would allow First Data to acquire Western Union Financial Services, if the latter's bankruptcy judge approves.

To prevent a monopoly, First Data would then divest either its Moneygram business or Western Union's money transmission service.

Said the FTC press release, "This is the first time a federal antitrust agency has challenged a merger between two payment systems competitors."

Mr. Balto said Justice, indeed, has first call on most payment system antitrust cases.

But he makes no bones about his wanting to reverse the "green light" of the 1980s and early 1990s. He said some "natural monopoly" and "efficiency" arguments, like those shot down in the First Data case, ought to be reexamined elsewhere.

In a June 14 American Banker article, Mr. Balto listed several areas worthy of probing, including credit card interchange fees, interest rates, ATM surcharges, and network mergers.

"The FTC has become extremely knowledgeable about the payment services business over the last two years," said Paul A. Allen, executive vice president and general counsel of Visa U.S.A.

He commended Mr. Balto's writings and understanding of payment services, suggested the FTC is becoming "a player on the regulatory scene in terms of law and the payment systems," and said the agency's involvement could result in "healthy tension" with its counterpart at Justice.

"It could very well be that the FTC is another force to contend with," Mr. Constantine said.

"David Balto may be the most knowledgeable attorney in government on issues related to competition in the payment systems," said Mr. Constantine. "He's brilliant, a prolific author, and lectures extensively."

But the New York lawyer also pointed out it is a far cry from the First Data-Western Union money transfer merger - which he sees as a definitive monopoly - to the subtleties and complexities of some banking-related joint ventures.

[Tabular Data Omitted]

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