CSI: Cards

  I have to give my colleague Frederick Lowe, editor of Thomson Media's CardLine daily news service, credit for some snappy headlines. On Oct. 6, when CardLine reported that Lloyd Constantine was Discover's attorney in the card issuer's new lawsuit against Visa and MasterCard, the headline for the item said, "Discover Lawyer Constantine Says to Visa and MasterCard, "'Haven't We Met?'"
  Mr. Constantine, of course, was the lead attorney for the retailers' class-action lawsuit led by Wal-Mart Stores Inc. over debit card acceptance costs. You know the story: After seven years of pre-trial preparations, Visa and MasterCard last year settled what came to be known as the Wal-Mart case for more than $3 billion and agreed to lower debit interchange and end their honor-all-cards policies.
  So when the card associations learned that their old nemesis is now Discover's lawyer, they must have felt some pangs of anxiety. Apart from Visa and MasterCard's top executives themselves, who else knows the inner workings-and vulnerabilities-of the associations better than he?
  This new tussle originates from yet another Visa/MasterCard legal defeat, the Department of Justice antitrust lawsuit challenging the associations' bans on U.S. members issuing cards on competing payment networks, i.e. American Express and Discover. The DOJ sued in 1998; a federal trial court ruled in 2001 that the bans violated antitrust laws. An appellate court upheld the decision, and in early October the Supreme Court announced that it would not review the card associations' appeals (Card Watch, page 6). That clears the way for the plan announced earlier this year in which MBNA Corp., the No. 2 Visa/MasterCard issuer, will issue AmEx-branded cards. Discover says several bank card issuers are strongly interested in issuing Discover-branded cards but as of this writing hadn't announced specific deals.
  Discover, whose market share has been stuck in the 6% range for years, claims in its suit the Visa/MasterCard exclusionary policies limited its growth opportunities and seeks unspecified damages. New York City-based American Express hasn't filed a similar suit, but it recently hired a star attorney, David Boies, who represented the DOJ in its antitrust case against Microsoft Corp. from 1998 to 2000, for undisclosed duties. Boies was lead counsel for former Vice President Al Gore in his case related to the presidential vote count in Florida in 2000. At least one equity analyst thinks AmEx could get $1 billion in damages if it sued Visa.
  Far be it from me to prognosticate on the legal merits of such suits. But for news value or even entertainment value, they're real winners no matter who prevails. If the Wal-Mart case, which sent the debit card status quo to the morgue, was akin to the original CSI: Crime Scene Investigation, Discover is CSI: Miami. Can a card version of CSI: NY be far behind?