DOJ Sues to Stop Merger of PIN Debit Networks
October 23, 2003. The Department of Justice (DOJ), seven states, and the District of Columbia filed a complaint [28 pages in PDF] in U.S. District Court (DC) against First Data Corporation and Concord EFS, Inc., alleging that First Data's planned acquisition of Concord would violate Section 7 of the Clayton Act.
Hewitt Pate (at right), the Assistant Attorney General in charge of the Department of Justice's Antitrust Division, stated in a release that "If allowed to proceed, this merger of two of the three largest PIN debit networks will lead to higher prices to merchants, forcing them to pass on those price increases to many consumers throughout the United States in the form of higher prices for general merchandise ... In filing this lawsuit, the Department is seeking to preserve the benefits to American consumers of competition among PIN debit networks."
The complaint alleges that point of sale (POS) personal identification number (PIN) networks are "telecommunications and payment infrastructure that connects merchants to consumers' demand deposit accounts at banks. These networks enable consumers to purchase goods and services from merchants through PIN debit transactions by swiping their bank card at a merchant's terminal and entering a Personal Identification Number, or PIN. Within seconds, the purchase amount is debited from the customer's bank account and transferred to the retailer's bank."
It further alleges that "Concord operates STAR, the nation's largest PIN debit network. STAR currently handles approximately half of all PIN debit transactions in the United States. First Data owns a controlling interest in NYCE, the nation's third-largest PIN debit network."
"First Data's acquisition of Concord would substantially reduce competition among the PIN debit networks for retail transactions, in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18." And ultimately, the complaint alleges, this would lead to higher prices for consumers.
The complaint requests that "the proposed acquisition be adjudged to violate Section 7 of the Clayton Act" and that "the Defendants be permanently enjoined and restrained" from carrying out their April 1, 2003 merger agreement.
First Data issued a release in which it stated that the two companies "have just been notified that the U.S. Department of Justice intends to file a lawsuit challenging the proposed merger of the two companies. The companies will make further comment upon receipt of the formal complaint."
This case is United States of American, et al., v. First Data Corporation
and Concord EFS, Inc., D.C. No. 1:03CV02169, Judge Rosemary Collyer