DOJ Charges Ahead Against Visa and MasterCard
VARNEY: Visa and MasterCard took center stage today in a Justice Department antitrust lawsuit. Government lawyers claim the two companies use unfair business practices that hurt customers in the trillion-dollar credit card business. The argument from Visa and MasterCard: Well, they say that their policies promote competition and any government intrusion would cause harm to the credit-card business. Susan Lisovicz reports on day one of the case.</s>SUSAN LISOVICZ, CNN CORRESPONDENT (voice-over): Visa and MasterCard together control three-quarters of the nation's banking card industry, but that's not why the government says they have a duopoly that stifles innovation. Visa and MasterCard share the same network of banks and financial institutions, and the government says that makes them reluctant to compete against each other. In opening statements in Manhattan's federal court, the government said a prime example of that collusion was the long delay in introducing smart cards. Even though MasterCard long possessed the technology which allows consumers many more services, it was rival American Express who finally brought them to market. But MasterCard says the delay was all about good business sense.</s>KEVIN ARQUIT, MASTERCARD ATTORNEY: We did a study, and it turned out it would cost us a billion dollars to develop this. It would be 10 years before we turned a profit, and it was just seen as too expensive a venture. The fact of the matter is that in United States there simply isn't a business case yet for smart cards.</s>LISOVICZ: American Express, Discover and other competitors want access to Visa's and MasterCard's vast network of member banks. But Visa and MasterCard say the government would in effect be giving their rivals a free ride and they say consumers have plenty of choice already.</s>KELLY PRESTA, VICE PRESIDENT, VISA USA: Visa itself offers more than 24,000 different kinds of Visa cards to consumers, whether you like jazz or a sports team or your local university. And in addition, last year, consumers received more than 4 billion solicitations in the mail. That's a red-hot competitive environment.</s>LISOVICZ: But the government and consumer groups say there would be even more competition if Visa and MasterCard's network were opened up to other bank cards.</s>FRANK TORRES, CONSUMERS UNION: If the banks were allowed to issue other products, and I think that's what the suit is all about, is who ultimately gets to control the payment system and should there be one or two companies that dominate or should there be a lot of companies that can get into that market.</s>LISOVICZ: The government poured through 8 million pages of documentation in preparing for its case against Visa and MasterCard. But just this past weekend, government lawyers dropped two of its six accusations. Visa and MasterCard say that proves just how difficult it will be for the government to win its case -- Stuart.</s>VARNEY: All right, Susan Lisovicz, thank you. In tonight's "Tech Watch," add another victim to the growing list of dot.com duds: Reel.com. The online retail division of video chain Hollywood Entertainment is closing after the company was unable to get outside financing. Reel.com will continue to provide entertainment content, but all e-commerce transactions will be redirected to Buy.com. All employees of the retail division have been laid off. Reel.com is the latest in a string of dot.com burnouts. Investigative news site APBNews.com is technically still in business, but the company has no money and its employees are now working for free. Retailer Boo.com and toy retailer ToySmart.com also went belly up recently. And when MONEYLINE continues: more bad news for drivers as oil prices today surge to a three-month high. The details after this break.