Antitrust
Case Background
One recent antitrust action has been between the United States Justice Department and the credit card companies. The government has argued that American Express has hindered competition in the credit card market. At issue are rules that AMEX imposes on retailers to prevent them from offering incentives to customers to use other cards (Longstreth, 2014). This is not the first time that credit card companies have faced antitrust action, either. In 2012, Mastercard and Visa entered into a settlement worth $7.25 billion, regarding alleged price fixing of the interchange fees that are paid by merchants when customers use Mastercard or Visa for their purchases. Interchange fees are paid by the store to the credit card company. When these two companies always charge the same fees, it opened up the possibility of antitrust legislation, with accusing of collusion. The settlement meant that the companies were not officially found of any wrongdoing (Grossman, 2012).
Costs to the Market
There are costs associated with antitrust behavior, and that is why the government has pursued these cases. The credit card industry is a complex ecosystem that includes store cards, but third-party cards operate under oligopoly conditions, with three companies (Mastercard, Visa and American Express) holding a commanding share of the market (Heggestuen, 2014). There are high barriers to entry in this industry, because...
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