Free Essay

Visa Mastercard

In: Business and Management

Submitted By im288
Words 751
Pages 4
USA V. VISA U.S.A. INC., VISA INTERNATIONAL CORP., AND MASTERCARD INTERNATIONAL INCORPORATED

In 1998 USA filed a complaint against Visa and MasterCard re their dual governance and exclusionary rules of combinations and conspiracy in restraint of trade. (DOJ, 1998)
Essay Plan

My motivation for choosing the abovementioned case comes from my interest in the financial services market, its regulations and their implications on consumers. This case is attention-grabbing, not solely due to the remedy, but also due to the implications it has on domestic and international markets. It also gives the opportunity to analyse the controversy of vertical exclusionary restraints (Whinston, 2006).

When analysing the Visa-MasterCard case, there are two main ‘economic-schools-of-thought’ to be considered. Chicago School(CS) dismisses vertical exclusionary contracts as an anti-competitive tool. While, Post-Chicago School(PCS) offers an opposing explanation by suggesting different models to rationalise anti-competitive behaviour using vertical restrictions. Both schools build their models under the assumption of first-mover advantage and the monopoly power of an incumbent firm. (Motta, 2004)

Using the CS in this case, we could assume that Visa and MasterCard are the combined incumbent on the market, due to their cooperative actions. The banks are the buyers and AmericanExpress is the potential new entrant. It could be assumed that AmericanExpress is a new entrant for the market of issuing cards through intermediaries, rather than through their own network, as it has previously done. As Visa and MasterCard offered the banks voting board member rights as an incentive to issue their cards. One could categorise this as a preemptively foregone “compensation”, justifying signing an exclusionary contract as an efficiency-enhancing scenario.

However, PCS suggests that in a market where several buyers don’t coordinate action, and a potential entrant needs to secure a threshold of buyers to cover its ‘fixed costs of entry’, the incumbent can abuse the lack of coordination of buyers to deter entry. As suggested by Rasmusan (1991) and Segal and Whinston (2000) if all buyers accept exclusive dealing one alone has no incentive to reject it due to the inability to cover this threshold.

This explains Visa-MasterCard’s engagement in exclusionary-contracts with card-issuing banks for entry deterring purposes. A sole bank wouldn’t have the incentive to sacrifice their access to the dominant payment system. While changing to AmericanExpress would potentially offer a more efficient system, it would endanger the banks’ market position as its cards would be less widely accepted among retailers. Simultaneously, if banks are able to coordinate and swap to AmericanExpress, it wouldn’t have the capacity to satisfy the market.

These two contradictory arguments provide a sufficient basis to analyse the effects of the exclusionary practices adopted by Visa and MasterCard. The critical analyses would also question the controversial effects of the dual governance. In 1970 Visa’s attempt to restrain a bank to become a card-issuing member of MasterCard was rejected by the DOJ because of potential anticompetitive effects. This led to the dual governance, which also projects some evidence of anticompetitive behaviour such as less innovation and advertising for both of the companies (Kwoka and White, 2009).
In my opinion Visa-MasterCard’s dual governance harmed the consumers, even-though there wasn’t sufficient evidence. This could be observed by the series of antitrust cases the companies have been settling since the late 90s. Until recently the two companies have never competed with each other, which not only restrains the competition between them, but also allows them to use their combined dominant power on the market (Kwoka and White, 2009). Ultimately, when observing the externalities, I consider the exclusionary restraints inherently anticompetitive.

References

Boone, J., Muller, W. and Suetens, S. (2014). Naked exclusion in the lab: The case of sequential contracting. The Journal of Industrial Economics, 62(1), pp.137--166.
Department of Justice, (2014). Complaint. [online] Available at: http://www.justice.gov/atr/cases/f1900/1973.pdf [Accessed 31 Oct. 2014].
Harbord, D. and von der Fehr, N. (2007). The Law and Economics of Vertical Restraints: An Overview. 1st ed. [ebook] Available at: http://www.market-analysis.co.uk/PDF/Reports/Vertical%20Restraints_%2010December07.pdf [Accessed 30 Oct. 2014]. Kwoka, J. and White, L. (2009). The antitrust revolution. New York: Oxford University Press
Motta, M. (2004). Competition policy. Cambridge: Cambridge University Press.
Simpson, J. and Wickelgren, A. (2007). Naked exclusion, efficient breach, and downstream competition. The American Economic Review, pp.1305--1320.
Whinston, M. (2006). Lectures on antitrust economics. Cambridge, Mass.: MIT Press.

Similar Documents

Premium Essay

Pestle Analysis

...www.datamonitor.com Datamonitor USA 245 Fifth Avenue 4th Floor New York, NY 10016 USA t: +1 212 686 7400 f: +1 212 686 2626 e: usinfo@datamonitor.com Datamonitor Europe Charles House 108-110 Finchley Road London NW3 5JJ United Kingdom t: +44 20 7675 7000 f: +44 20 7675 7500 e: eurinfo@datamonitor.com Datamonitor Germany Kastor & Pollux Platz der Einheit 1 60327 Frankfurt Deutschland t: +49 69 9750 3119 f: +49 69 9750 3320 e: deinfo@datamonitor.com Datamonitor Asia Pacific Level 46 2 Park Street Sydney NSW 2000 Australia t: +61 2 8705 6900 f: +61 2 8705 6901 e: apinfo@datamonitor.com Datamonitor Japan Wakamatsu Bldg 7F 3-3-6 Nihonbashi-Honcho Chuo-ku Tokyo 103-0023 Japan t: +813 6202 7681 f: +813 5778 7537 e: jpinfo@datamonitor.com Contactless Payments 2006 Reference Code: DMFS1839 Publication Date: 06/06 All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, Datamonitor plc. The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the findings, conclusions and recommendations that Datamonitor delivers will be based on information gathered in good faith from both primary and secondary sources, whose accuracy we are not......

Words: 22812 - Pages: 92

Premium Essay

Rockingham Case

...Rockingham National Bank Visa Card Survey Company Background  Rockingham National Bank, located in Chicago, Illinois, is attempting to expand the market for its Visa card. It is examining certain target groups to determine its ability to penetrate the credit card market with special offers. Purpose of the Study  The purpose of this research study is to evaluate how teachers in Illinois will respond to specific credit card promotional offers. Specifically, the questionnaire was designed to achieve the following objectives: ν Develop a demographic, psychographic, credit card ownership, and credit card usage profile of teachers. ν Determine the likelihood of teachers to respond to several different concepts for a credit card offer. ν Determine which demographic, psychographic, attitudinal, credit card ownership, and credit card usage variables are the best predictors of likelihood to respond to the concept credit card offers. ν Make predictions regarding the likely level of response to a credit card offer to the teacher market. ν Identify those features most likely to induce teachers to respond to a credit card offer. Research Approach  All data were collected by means of central location telephone interviewing from the Ameridata facility in Arlington, Texas by experienced Ameridata interviewers. The interviews were conducted with software-driven interfaces to virtually eliminate tabulation errors. All interviewing was supervised and......

Words: 7530 - Pages: 31

Premium Essay

Mobile Wallet

...Are you tired of those pesky credits cards in your wallet? Are you sick of how long it takes to reach in your wallet and break out a credit card to pay for you items at the grocery store? Well, if you said yes then there is now an app for that. Apple has recently announced that the new iphone’s will come ready with an application that allows you to store your credit card information and scan it at all easy pay location. This week I have read and summarize the article: Apple Teaming up with Visa, MasterCard on IPhone Wallet written by Mat Townsend at Bloomberg. In this paper I will break down the article, offer up issues and perspectives, and how I feel about the technology. To summarize, the article starts off by telling us that Apple intends to partner up with Visa and MasterCard by turning the next iPhone into what they consider a “mobile wallet”. The new iPhone claims it will make payments to retailers easier by including a near field communication integrated into the phone. They claim this technology in conjunction with fingerprint technology will allow customer the ability “to securely pay for an item in store with the touch of a finger”. The article continues on to say that google has been investing into ways of giving phones the capability to make payment at retailers causing retailers to slowly adopt the concept, but the market for it was limited. With apple coming into the scene Ben Bajarin, an analyst for Creative Strategies LLC in San Jose, claims apple will......

Words: 818 - Pages: 4

Premium Essay

Pelican Store

...Statistical Analysis of the net sales of Pelican Store The following will examine the tables that were formulated based on the data given and state conclusions on what it represents. This data was collected from a sample of 100 customers that used a credit card at Pelican Stores one day during a discount-coupon promotion. All of the tables are categorized in different groups representing the net sales of the Pelican Store. They show the mean, median, mode, standard deviation, variance, skewness, kurtosis, range and the 25th, 50th and 75th percentile. All of these statistical outputs each embody a particular meaning. The first table that was constructed represented the frequencies of the net sales of the pelican store data and is simply a basic overview of sorts of the data. The mean here indicates that on average Pelican Stores customers spent over $77. The standard deviation shows how close the rest of the individual data is from the averages and the closer they are, the more accurate the average is. The data has a standard deviation of $55.66 from the average spending which is reasonably low and it is safe to assume that the data is fairly accurate. The percentiles show that 25% of customers spent $39.60, 50% spent $59.70 and 75% spent $101.90 The second table divides the net sales into gender groups. It shows that 93% of customers were female and the rest were male which is reasonable as this is a woman’s apparel store. The females on average spent $79.18......

Words: 1050 - Pages: 5

Free Essay

Mastercard

...MasterCard Incorporated Company Profile Publication Date: 17 Jun 2011 www.datamonitor.com Europe, Middle East & Africa 119 Farringdon Road London EC1R 3DA United Kingdom t: +44 20 7551 9000 f: +44 20 7551 9090 e: euroinfo@datamonitor.com Americas 245 5th Avenue 4th Floor New York, NY 10016 USA t: +1 212 686 7400 f: +1 212 686 2626 e: usinfo@datamonitor.com Asia Pacific Level 46 2 Park Street Sydney, NSW 2000 Australia t: +61 2 8705 6900 f: +61 2 8088 7405 e: apinfo@datamonitor.com MasterCard Incorporated ABOUT DATAMONITOR Datamonitor is a leading business information company specializing in industry analysis. Through its proprietary databases and wealth of expertise, Datamonitor provides clients with unbiased expert analysis and in depth forecasts for six industry sectors: Healthcare, Technology, Automotive, Energy, Consumer Markets, and Financial Services. The company also advises clients on the impact that new technology and eCommerce will have on their businesses. Datamonitor maintains its headquarters in London, and regional offices in New York, Frankfurt, and Hong Kong. The company serves the world's largest 5000 companies. Datamonitor's premium reports are based on primary research with industry panels and consumers. We gather information on market segmentation, market growth and pricing, competitors and products. Our experts then interpret this data to produce detailed forecasts and actionable recommendations, helping you create new business......

Words: 8789 - Pages: 36

Free Essay

Favorite Brand Paper

...needs of those less fortunate, the brand has made a lasting impact of the past 160 years that it has been in business. Membership Rewards Another reason why I am passionate about the American Express Brand is because of its membership rewards that allows customers to use points to pay for card charges that have already happened. Customers can review their statement and then apply earned points towards various dining and entertainment charges on their bill. This is incredibly convenient for me, as a student, to be able to save money and still enjoy life. American Express has one of the best rewards systems for their customers of any of their competitors. This move makes the company stand out from its main competitors of Visa and MasterCard. While many...

Words: 814 - Pages: 4

Free Essay

Reflect on How You Would Compare and Contrast Your Own Definitions of Health and Illness with the Definitions of Health and Illness You Would Provide for a Group of Low Socio-Economic Status People Living with a Chronic Illness and or Disability.

...JR Medical Books 728 Plenty Road, Reservoir Vic 3073. ABN 60 876 453 677 T: 03 9478 3288 F: 03 9478 6200 E: info@medicalbooks.com.au W: www.medicalbooks.com.au Australian Catholic University - Bachelor of Nursing Year 3 2016 Booklist Order Online at www.medicalbooks.com.au Or Fill in form (fax/email), or Pick up from Shop Textbook Requirements Retail Prices 15% Discount Semester 1 NRSG 353 Acute Care Nursing 2     Smeltzer & Bares Textbook of Medical Surgical Nursing 3rd Ed 2013(Web Code 9781920994648) Bullock: Pack Principles of Pathophysiology + Access Card 2012 (Web Code 9781486094011) Bryant: Pharmacology for Health Professionals 4th Ed 2014 (Web Code 9780729541701) Tollefson: Clinical Psychomotor Skills (5 Point) 6th Ed 2016 (Web Code 9780170382786) $179.00 $163.95 $135.00 $79.95 $152.15 $139.36 $114.75 $67.96 $59.95 $179.00 $92.50 $163.95 $135.00 $74.95 $50.96 $152.15 $78.63 $139.36 $114.75 $63.71 NRSG354 Clinical Integration: Complex Care       Brotto: Clinical Dosage Calculations 2nd Ed 2016 (Web Code 9780170352659) Smeltzer & Bares Textbook of Medical Surgical Nursing 3rd Ed 2013(Web Code 9781920994648) Forrester: Essentials of Law for Health Professionals 4th Ed 2014 (Web Code 9780729541664) Bullock: Pack Principles of Pathophysiology + Access Card 2012 (Web Code 9781486094011) Bryant: Pharmacology for Health Professionals 4th Ed 2014 (Web Code 9780729541701) Tiziani: Harvard’s......

Words: 347 - Pages: 2

Free Essay

Caso Paypal

...expansión de su servicio entre los usuarios de eBay en USA y, seguidamente, empezar a expandirse en otros sitios internacionales de eBay. Por último, se dedicaron a desarrollar las actividades de PayPal fuera de eBay. PayPal es un componente vital de la estrategia de crecimiento de eBay. Sin embargo, a su vez, el éxito de PayPal también está estrechamente ligado al éxito de los mercados de eBay. Visa y MasterCard, las dos compañías que representan la mayoría del volumen de las operaciones con tarjetas de crédito, están estructuradas como asociaciones que son propiedad y están bajo el control de miles de instituciones financieras que comparten la responsabilidad de la emisión de tarjetas y la adquisición de comerciantes, lo que dificulta mucho la innovación y/o cambios en el funcionamento de estas para intentar adaptarse a las nuevas oportunidades que nos va dando la tecnología. Sin embargo, sí que es cierto que ambas empresas han invertido en nuevas soluciones para la mejora de la seguridad de los pagos con tarjeta online. En 2002 lanzaron “Verified by Visa” y “MasterCard SecureCode” respectivamente, dos sistemas de autentificación doble que solicitaban la introducción de contraseñas a los titulares de tarjetas para compras online. Aunque con esta solución se gana el factor de la seguridad, en mi opinión personal, el factor comodidad se pierde ya que en Paypal todo resulta mucho más...

Words: 363 - Pages: 2

Premium Essay

F307 Paper

...and Regulatory Environment Walmart provide information on common scams to their customers such as fraud awareness sign and brochure. They also help their associates understand how to spot signs of fraud and protect the financial interests of their customers. They trained their associates on fraud and money laundering as part of their prevention strategy. In addition, Walmart uses an anti-money laundering software solution to monitor financial services activity for potential financial crimes. Walmart reports suspicious activity to the Financial Crimes Enforcement Network and law enforcement. d.     Available Pmt. Instruments Walmarts’s available payment instruments is card-based systems including credit or debit cards with MasterCard or Visa logo, Walmart credit Card, Bill Me Later, PayPal, Walmart Gift Card, cash and American Express. 7.  Management of Inventory Walmart has a highly efficient distribution system enables it to be the lowest cost provider of many goods. It makes the firm to maintain very low levels of inventory. Walmart continued improvement in inventory turnover over the years, therefore there is no sign that their competitors can catch up with Walmart’s lowest cost provider of many products. a. Elements of Basic Inventory Policy Walmart has its own satellite communication system since 1983. It allows them to monitor each activity going on in a particular store at any point of the day. Walmar allows the store to manage their own stocks......

Words: 359 - Pages: 2

Free Essay

Валютные Операции

...МІНІСТЕРСТВО ОСВІТИ І НАУКИ УКРАЇНИ НАЦІОНАЛЬНИЙ ТЕХНІЧНИЙ УНІВЕРСИТЕТ УКРАЇНИ «КИЇВСЬКИЙ ПОЛІТЕХНІЧНИЙ ІНСТИТУТ» Факультет менеджменту та маркетингу Кафедра міжнародної економіки КОНТРОЛЬНА РОБОТА з дисципліни «Валютні операції» на тему: “ Кредитні картки ” Студента V курсу, групи УС-41с спеціальності «Міжнародна економіка» Пистряка Артема Вячеславовича Перевірив: д.е.н., професор Кочетков В.М. Київ – 2014 План Вступ 3 1.Історичні передумови виникнення кредитних карток 4 2.Безготівкові розрахунки, здійснювані за допомогою кредитних карток …………………………………………………………………………7 3. Проблеми і перспективи розвитку індустрії банківських пластикових карток в Україні 12 Висновок 18 Список використаної літератури: 20 Вступ В отанні часи банками приділяється велика увага до операцій з використанням пластикових карток. Одною з причин такої уваги є зміни, які зараз відбуваються на ринку банківських послуг. Стартовий період розвитку банківських структур в нашій країні близький до завершення. Цей період характеризувався чітким перевищенням попиту на банківські послуги над їх пропозицією, що і стимулювало стрімкий зріст кількості банків, а також сприяло спеціалізації банківських установ. Наприклад, надавалась перевага роботі з організаціями, а в розвиток обслуговування фізичних осіб в більшості випадків або залишався на другому плані, або зовсім ігнорувався. Дійсно, залучення коштів населення потребує на початковому етапі істотних фінансових......

Words: 4320 - Pages: 18

Premium Essay

Pelican Stores Case Study

...Method of Payment 0.01 1% 0.03 3% 0.01 1% 0.01 1% 0.01 1% 1 100% 10 30 33 16 7 4 100 Relative Freq. Percentage Freq. 0.1 10% 0.3 30% 0.33 33% 0.16 16% 0.07 7% 0.04 4% 1 100% Count of Items Row Labels 1 2 3 4 5 6 7 8 9 10 13 17 Grand Total Total Count of Age Row Labels 20-29 30-39 40-49 50-59 60-69 70-80 Grand Total Total Number of Classes Largest data value Smallest data value Aprox. Class width 2. A bar chart or pie chart showing the number of customer purchases attributable to the method of payment. Payment Method Chart Payment Method Chart 80 70 Customer Purchases 60 50 40 30 20 10 0 American Express Discover MasterCard Proprietary Card Visa Payment Method 3. A crosstabulation of Type of customer versus Net sales . Comment Count of Type of Customer Row Labels Promotional Regular Grand Total Column Labels 10-40 40-70 17 9 26 21 12 33 70-100 100-130 130-160 11 9 4 4 3 2 15 12 6 This crosstabulation shows that even thought customers with promotional discount spent more than the regular ones, most of the customers (promotional and regular) didn’t spend more than $130. This probably means that the promotion was a success because the sales went up, but it doesn’t mean that people bought more items, just that more people went to buy to the store. 4. A scatter...

Words: 591 - Pages: 3

Premium Essay

Alyy

...Introduction (Attention and Credibility): How many of you have a credit card? Consumer Reports says 2/3 of you do. It can seem so quick, easy, and harmless to whip out your plastic to pay for a purchase. The credit companies, like Visa, MasterCard, Discover Card, and American Express, market themselves nonstop, portraying themselves as harmless, and offering both rewards like free airline miles and incentives like low introductory interest rates. With all the attractive commercials, you might find it hard to believe that Consumer Reports found 33% of Americans carrying credit card balances of up to $10,000, and 13% with balances of over $10,000. This debt represents a major problem. While the credit card companies are out to get you, I will tell you today how you can avoid falling into the pit of credit card debt, even if you use a credit card. Specific Purpose: After hearing my speech, you will want to use your credit card in ways that will benefit you. Thesis Statement (Hidden): Today I will tell you about the consequences of credit card debt, ways to use your credit card beneficially, and finally, the benefits of using it properly. Body Transition: Though credit cards can be used to your advantage, many people find themselves in trouble at the hands of these monsters. I. (Need.) Credit card debt is a major problem in the United States because if credit cards are not used carefully, they can easily get people into severe financial trouble. ......

Words: 1410 - Pages: 6

Premium Essay

Business

...4. Assess the external threats affecting American Express and the opportunities available to the corporation. Give your opinion on how the corporation should deal with the most serious threats and opportunities. One of the external threats affecting American Express is due to technology trends. For instance, prior to technology, American was the most dominated credit card company in the credit cards sector. However, Penetration of alternative payment platforms has been gaining popularity in the recent years. These alternative payment platforms include aggregators such as PayPal, wireless payment technologies, including using mobile telephone networks to carry out transactions. According American Express Company (2014), “the system has changed to system sinked to payment cards, and bank transfer models increasing penetration with other alternative payment platforms could check growth for the company.” Therefore, the portability provided by Smartphones and tablets and evolving consumer behavior with social networking, is rapidly changing the way people interact with each other and transact business all around the world. Another major threat that might affect Amex is due to political factor. For instance, according to Ireland and Hoskisson (2013), “Congress passed Dodd-Frank, which the US President Barack Obama signed into law in July 2010”. Therefore, Dodd-Frank could limit Amex’s income earned through interchange fees. As a result of these new laws, customers may be......

Words: 1291 - Pages: 6

Premium Essay

Internship

...1.1 Background of Study Bachelor in Business Administration (BBA) program is run by Tribhuvan University from 2002 under the supervision of the Faculty of Management (FOM). It aims to provide quality education through quality and professional courses. BBA is four years international standard program consisting of eight semesters along with internship program. Thus, BBA program is a blend of theoretical and practical knowledge on the financial sector enabling the students in understanding business environment and solving practical business problems. It also aims to develop creative, socially responsible and skilled professionals who are able to carry out the responsibility of middle level managerial positions in the rapidly growing business sector in Nepal as well as abroad. Theoretical knowledge is not sufficient in this competitive and complex business world. Thus, in the eight semester of BBA program, student is required to work in financial institution for at-least eight weeks, where they can experience real situations of work environment in the organization. It also helps in understanding organizational environment and work culture. Internship program enables in acquiring skills and techniques by experiencing practical work situations directly applicable to develop career on financial sectors. It may also create the opportunities for placements in the same host organization or other organizations. 1.2 Objective of Report After the completion of internship program,......

Words: 4847 - Pages: 20

Premium Essay

The Dangers of Credit Cards

...The Dangers of Credit Cards   Credit cards are an inevitable factor in growing up. Once you turn eighteen it all starts. You receive applications in the mail daily and commercials appear on television as well. This starts to spark an interest. So you say to yourself, "I think I'm responsible enough to get a credit card, I'll only use it for emergencies." Then you apply and it may take a couple times to finally be approved for one. This only makes it worse, of course, because you realize how long you have waited and now you get to buy anything you want, after all you don't have to pay it off for a month. The year is 2001, more and more teen's own credit cards and are already establishing their credit history. This essay will prove the truth about credit cards and what it's like to be in debt. It will also show the easy ways in which commercials and credit card companies can lure you into debt.   Credit cards seem to be the easy way to purchase things. If you want a pair of pants but don't have the cash, you can just charge it. In reality, credit cards are not that easy. Once you are approved for a card the company gives you a credit limit, which is proportional to your income. On the average, an eighteen year old would have about a $250 limit. Which is good because it means teenagers cannot charge past the maximum amount of money. When a credit card is maxed out it means that you have hit the highest amount of money you can spend and it won't let you spend......

Words: 1843 - Pages: 8