Opinion ID: 678902
Heading Depth: 1
Heading Rank: 4

Heading: Issuer Market

Text: 45 This case illustrates both the utility and difficulties of the market power tool. In this lawsuit, Sears and Visa USA stipulated the relevant market is the general purpose charge card market in the United States. 819 F.Supp. at 966. Presently, the only participants in this market are Visa USA, MasterCard, American Express, Citibank (Diners Club and Carte Blanche), and Sears (Discover Card). Competition among these five firms to place their individual credit cards into a consumer's pocket is called intersystem. Interbrand competition is the competition among the manufacturers of the same generic product ... and is the primary concern of antitrust law. Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 52 n. 19, 97 S.Ct. 2549, 2558 n. 19, 53 L.Ed.2d 568 (1977). 46 In its complaint, Sears alleged the amendment to Bylaw 2.06 represented a concerted refusal to deal which unreasonably restrained trade in the general purpose charge card market. The parties agreed, and the testimony clearly established that in this relevant market competition occurs only at the issuer level. That is, to the extent that Visa USA is in the market, it operates in the systems market, not the issuer market. Its members issue cards, competing with each other to offer better terms or more attractive features for their individual credit card programs. This is intrasystem competition. 47 The issuer market, thus, remains atomistic, each issuer financial institution, bank, or other entity being independent from another. 11 Although Sears does not dispute this characterization of the market, it contends it attempted to launch its Prime Option program under the Visa aegis to compete more effectively at the issuer level. By offering multiple credit cards, Discover and Prime Option Visa, Sears contended it would then strengthen competition. 48 If the general credit card issuer market is the relevant market, however, the evidence the district court relied upon to deny the Rule 50(b) motion belies Sears' contention and calls into question the definition of relevant market the court apparently adopted. First, the district court recounted the market shares of each intersystem competitor: Visa was estimated to possess 45.6% of the nationwide general purpose charge card market; MasterCard, 26.4%; American Express, 20.5%; Discover Card, 5.5%; and Diners Club, 2.0%. 819 F.Supp. at 966 (footnote omitted). Within Visa USA's intersystem share, aggregated to include MasterCard issuers as well, the district court noted the evidence showed in 1991 the ten largest issuers of Visa and MasterCard accounted for approximately 48% of the total Visa/MasterCard charge volume. The top-ten issuers were Citicorp, First Chicago, AT & T, Chase Manhattan, MBNA America, Bank of America, Nationsbank, Chemical Bank, Banc One, and Wells Fargo Bank. The largest issuer, Citicorp, accounted for approximately $42.5 billion in charge volume in 1991--representing approximately 15.8% of the Visa/MasterCard market and 11.4% of the entire general purpose charge card market. Id. at 966 n. 8. 49 While these raw figures may suggest Visa USA possesses market power in the intersystem market, the parties have established a different paradigm. By their agreement, the context of this case was intended to focus on the issuance of credit cards as the relevant market. Indeed, that is the market the district court defined for the jury. To determine, therefore, whether Visa USA possesses market power, we must compare issuers, the point where both Sears and Visa USA agreed they compete. At that level, testimony from both Sears and Visa experts established Discover Card is the second largest issuer preceded only by Citicorp in terms of charge volume, that is, what consumers owe on their credit cards. 50 Based on the district court's figures, Citicorp's charge volume represented about 15.8% of the Visa/MasterCard market share, aggregated at 72% of the general purpose credit card market. If we compare issuers' charge volume, our calculations demonstrate Citicorp's is 21.9% in the relevant market, while that of Sears Discover Card is 5%. Neither figure reflects at the issuer level that Visa USA through its members possesses market power. 51 Nevertheless, Sears' expert, Dr. James Kearl, upon whom the district court relied to conclude the evidence was sufficient to establish Visa USA's market power, explained he looked at the collective, aggregated shares of Visa and MasterCard, because we have a collective rule, bylaw 2.06 ... I found that the collective share was very large, and as a consequence my conclusion was that the collective rule was an exercise of market power. (italics added). Dr. Kearl opined the association members 52 have both incentive and the ability to exercise that market power. They have the incentive because this market share was large and they want to protect that market share. And they also had the incentive because since this is large, if they can keep prices up or from falling they can make a lot of money. 53 (italics added). 54 Second, despite the stipulation on the relevant market, the market relevant to the legal issue before the court, 1993 Supplement, at 535, the testimony reflects that Sears, in fact, sought to expand its competition not specifically in the general purpose credit card market but in a segment of that market represented by financial institutions or banks. For example, Sears' executive, William O'Hara, stated, We were trying to compete in that segment of the general purpose credit card market called the bank association segment. (emphasis added.) Visa USA's witness, Richard Rosenberg, explained he voted for Bylaw 2.06, believing that because a non-bank like Dean Witter did not have to comply with certain requirements imposed on banks like the Community Reinvestment Act, Sears would have a competitive advantage over its bank rivals. 55 Indeed, albeit the stipulation, as the trial progressed, the relevant market devolved into Visa USA's share of the defined market. Thus, the legal issue was transformed, equating exclusion from Visa USA to exclusion from the market. 12 The evidence, however, does not support this mutation. The district court recognized five active rivals presently compete at the intersystem level. Of that market, for example, Citicorp represents 21.9%, American Express 20.5%, and Sears 5%. At the issuer level, where intrasystem competition occurs, the court found, and the parties' experts agreed, the market is remarkably unconcentrated. 13 Given the wide range of interest rates and terms offered by various issuers and Sears' recognized intersystem strength, we are at a loss to find the evidence to support the district court's contrary conclusion. 56 From this standpoint, even if Visa USA possesses market power, Dr. Kearl's testimony that Visa USA exercised that market power in its ability to make collective rules misses the point in the context of joint ventures. A joint venture made more efficient by ancillary restraints, is a fusion of the productive capacities of the members of the venture. Rothery Storage, 792 F.2d at 230. The very existence of a joint venture in the first instance is premised on a pooling of resources to affect competition in some manner and is made functional through some form of cooperative behavior or rule-making. However, the Court has made clear, as previously discussed, cooperative conduct alone is not prohibited. 57 Hence, it is not the rule-making per se that should be the focus of the market power analysis, but the effect of those rules--whether they increase price, decrease output, or otherwise capitalize on barriers to entry that potential rivals cannot overcome. Although Dr. Kearl testified if they can keep prices up or from falling they can make a lot of money to support his conclusion Visa USA possesses market power, there was no evidence that price had been increased, output had decreased, or other indicia of anticompetitive activity had occurred. 58 Thus, without any eye on effect, the very exercise of rule-making became the factual basis for rule of reason condemnation of Bylaw 2.06. Consequently, rule-making was not only divorced from its functional analysis but also from the facts of the case. When an expert opinion is not supported by sufficient facts to validate it in the eyes of the law, or when indisputable record facts contradict or otherwise render the opinion unreasonable, it cannot support a jury's verdict. Brooke Group, Ltd. v. Brown & Williamson Tobacco Corp., --- U.S. ----, ----, 113 S.Ct. 2578, 2598, 125 L.Ed.2d 168 (1993). In this complex area, the Court cautioned, Expert testimony is useful as a guide to interpreting market facts, but it is not a substitute for them. Id. 59 We believe the evidence cited by the district court to conclude Visa USA possessed market power is insufficient as a matter of law. Although the district court did not end its rule of reason inquiry upon that finding, the conclusion set the path for its uncharted journey upon a landscape of speculation, conjecture, and theoretical harm. The consequence is the finding of liability based on tendentious and conclusory statements, none of which amounts to evidence of restraint of trade. 14