Credit card firms face $24.3bn suit

Some of America's biggest retailers are claiming damages that could amount to as much as $24.3bn from Visa and Mastercard after accusing the credit card companies of forcing them to pay high transaction fees which then increase consumer prices.

A group of powerful companies led by Wal-Mart, the world's largest retailer, originally filed their lawsuit in 1996, alleging that the two credit card companies had violated anti-trust laws through their anti-competitive behaviour.

The US Justice Department followed this private lawsuit with its own legal action launched more than a year ago. In recent weeks, Judge John Gleeson has handed the retailer a preliminary victory by allowing the US Justice Department to review evidence with Wal-Mart's lawyers.

Retail groups including Sears Roebuck, Safeway and Circuit City have accused Visa and Mastercard of abusing their dominance of the credit card industry by forcing them to pay high prices for debit cards.

In a case with echoes of the landmark case against Microsoft, the credit card companies are accused of forcing stores to take both their debit and credit cards.

The lawsuit, filed in the US District Court in Brooklyn, is aimed at preventing the two card companies from bullying their way into new markets. The charges could be particularly challenging for Visa and Mastercard as they seek to take advantage of the growth in online shopping and greater need for electronic payments.

Visa, which is owned by 21,000 banks, is the world's largest consumer payment system with around 800m cards in circulation. MasterCard, the world's second largest, is owned by more than 23,000 financial institutions.

Together they control more than 75% of the world's credit card market.

In its lawsuit, the US Justice Department accuses the two companies of preventing banks from dealing with Amex, a competitor. It alleges that the companies do not effectively compete against one another through advertising and that they have slowed down the development of new card products and technologies such as smart cards and secure systems for the internet.

Janet Reno, the US Attorney General, said: "Visa and Mastercard's anti-competitive behaviour has stifled competition between these two dominant networks and has thwarted competition from smaller networks."

Neither company, which have both denied any wrongdoing, returned calls to discuss the case yesterday. A trial date has been set for the end of November.