[Federal Register Volume 59, Number 91 (Thursday, May 12, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-11571]


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[Federal Register: May 12, 1994]


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DEPARTMENT OF JUSTICE
Antitrust Division

 

United States v. Electronic Payment Services, Inc.; Proposed 
Final Judgment and Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Stipulation, Final 
Judgment, and a Competitive Impact Statement have been filed in the 
United States District Court for the District of Delaware in United 
States of America v. Electronic Payment Services, Inc., Civ. No. 94-
208.
    The Complaint alleges that the defendant, Electronic Payment 
Services, Inc. (``EPS''), the owner of the MAC automatic teller machine 
network, has forced MAC member institutions to purchase ATM processing 
from EPS and that this is a per se unlawful tying arrangement between 
regional ATM network access and ATM processing. The Complaint also 
alleges that the tying arrangement is a means by which EPS has 
maintained a monopoly in regional ATM network access in Pennsylvania, 
New Jersey, Delaware, West Virginia and New Hampshire, and in 
substantial portions of Ohio.
    The proposed Final Judgment enjoins EPS from requiring MAC members 
to purchase ATM processing from EPS, requires EPS to ensure that 
independent providers of ATM processing can obtain communication links 
to the MAC network, and enjoins EPS from forbidding MAC members to join 
other regional ATM networks.
    Public comment on the proposed Final Judgment is invited within the 
statutory 60-day comment period. Such comments and responses thereto 
will be published in the Federal Register and filed with the Court. 
Comments should be directed to Richard Rosen, Chief, Communications and 
Finance Section, room 8104, U.S. Department of Justice, Antitrust 
Division, 555 4th Street, NW., Washington, DC 20001.
Constance K. Robinson,
Director of Operations, Antitrust Division.

Complaint

    The United States of America, by its attorneys, acting under the 
direction of the Attorney General of the United States, brings this 
civil action to obtain equitable and other relief against the defendant 
named herein and complains and alleges as follows:

Nature of This Action

    1. The United States brings this civil antitrust action to obtain 
permanent injunctive relief against an anticompetitive practice of 
defendant Electronic Payment Services, Inc. (``EPS'') that constitutes 
a tying arrangement that is per se unlawful under Sherman Act section 
1, 15 U.S.C. 1, and that constitutes a means whereby EPS unlawfully has 
maintained a monopoly in access to regional automatic teller machine 
(``ATM'') networks in the Commonwealth of Pennsylvania and the States 
of New Jersey, Delaware, West Virginia and New Hampshire, and in 
substantial portions of the State of Ohio (collectively the ``affected 
states''), all in violation of Sherman Act section 2, 15 U.S.C. 2.
    2. EPS owns and operates the Money Access Service (``MAC'') ATM 
network, which has market power or monopoly power in the market for 
regional ATM network access in the affected states. EPS generally 
prohibits its customers--banks, savings and loan associations and 
credit unions (collectively ``banks'') that seek to make ATM network 
services available to their depositors--from obtaining ATM processing 
services (described at paragraph 6 below) from independent data 
processing firms who seek to compete for that business. Instead EPS 
requires MAC customers either to obtain those services from EPS or to 
provide them in-house, at a cost that is prohibitive for many smaller 
banks.
    3. As more fully described below, EPS's tying practice not only 
serves to raise the cost to banks of processing services, but also 
prevents banks from participating in more than one regional ATM 
network. Defendant thereby has maintained its monopoly in the affected 
states.
    4. The United States seeks a permanent injunction, pursuant to 
Sherman Act section 4, 15 U.S.C. 4, prohibiting EPS from refusing to 
allow its customers to obtain ATM processing from third party 
processors; requiring EPS to connect to those third party processors on 
nondiscriminatory terms; and other and further relief appropriate to 
remedy these violations.

Definitions

    5. ``ATM network'' means an arrangement whereby more than one ATM 
and more than one depository institution (or the deposit records of 
such depository institutions) are interconnected by electronic or 
telecommunications means, to one or more computers, processors or 
switches for the purpose of providing ATM services to the retail 
customers of depository institutions.
    6. ``ATM processing'' means providing the data processing services 
and telecommunications facilities and services used:
    1. To operate, monitor and support the operation of ATMs deployed 
by a depository institution;
    2. To connect the ATMs deployed by a depository institution to that 
institution's deposit authorization records, for authorization and 
confirmation of ``on-us transactions,'' and the record-keeping and 
other functions related to such transactions; and
    3. To connect the ATMs deployed by a depository institution to one 
or more branded ATM networks for authorization and confirmation of 
``on-others transactions,'' and the record-keeping and other functions 
related to such transactions.

ATM processing can be provided as a service distinct from branded ATM 
network access, and can be performed in the facilities of the ATM 
switch, a depository institution's own facilities, or in the facilities 
of a data processing service organization.
    7. ``ATM switch'' means a telecommunications and data processing 
facility used to receive and route transactions from ATMs or ATM 
processors to data processing facilities used by depository 
institutions to authorize ATM transactions. A ``MAC switch'' is an ATM 
switch operated by or on behalf of, or providing such functionality for 
branded ATM network access to, MAC or any successor branded ATM network 
controlled by defendant.
    8. ``Interceptor processor'' means a depository institution that 
provides ATM processing for itself.
    9. ``MAC'' means Money Access Service, the branded ATM network 
owned, controlled and operated by EPS, or any successor brand to 
``MAC.''
    10. ``Third party processor'' means any person that currently or in 
the future offers ATM processing services to depository institutions. 
Third party processors may include both depository institutions 
providing ATM processing for other depository institutions and firms 
unaffiliated with depository institutions that provide such services.

Party Defendant, Jurisdiction and Venue

    11. EPS is made a defendant in this action. EPS has its principal 
place of business at 1100 Carr Road, Wilmington, Delaware 19809. EPS is 
owned by four bank holding companies: CoreStates Financial Corp., 
Philadelphia, Pa.; PNC Financial Corp., Pittsburgh, Pa; Banc One Corp., 
Columbus, Ohio; and KeyCorp, Albany, New York. EPS owns and operates 
MAC, a regional ATM network, and other businesses. ``EPS'' and ``MAC'' 
are used interchangeably in this Complaint.
    12. This Court has jurisdiction over the subject matter of this 
civil antitrust action pursuant to Section 4 of the Sherman Act, 15 
U.S.C. 4. This Court has jurisdiction over EPS pursuant to Section 12 
of the Clayton Act, 15 U.S.C. 22.
    13. EPS is a Delaware corporation, and is found and transacts 
business in the District of Delaware. Venue is proper in the District 
of Delaware pursuant to 15 U.S.C. 12 and 28 U.S.C. 1491.

Interstate Commerce

    14. Defendant's MAC ATM network is the largest ATM network in the 
United States by transaction volume. In 1992, the MAC network handled 
92 million transactions monthly for 1,455 depository institutions 
deploying 13 thousand ATMs.
    15. The MAC network operates in interstate commerce, and 
defendant's practices affect interstate commerce.

The MAC ATM Network and Its Practices

    16. ATMs permit a depositor, using an ATM card and personal 
identification number, to obtain cash, monitor account balances, and 
transfer money or make payments. Some ATMs also permit customers to 
make deposits, and some dispense items of value other than cash (such 
as travelers checks, railroad tickets, etc.) ATMs usually are owned and 
maintained by individual banks, and are deployed by banks on premises 
and at other public locations convenient to their customers.
    17. ATMs typically are connected by telephone wires to a computer 
that provides processing, also known as driving, for several ATMs. That 
computer often is connected to a network switch, such as the MAC 
switch, for interchange of transactions among otherwise unaffiliated 
banks. An ATM network typically charges a switch fee per transaction, 
and may also charge various monthly or annual membership fees. The 
processor charges a separate fee for its services. Outside the MAC 
network, the driving computer might be operated by the bank, by a 
network, or by an independent data processing firm, and driving 
computer might connect those ATMs to several different networks. MAC's 
rules and practices, however, constrain interconnection of different 
ATM networks.
    18. Banks seek to participate in shared ATM networks, such as MAC, 
in order to give their depositors ubiquitous access to their accounts. 
While a bank can deploy its own ATMs, the advantage to a shared ATM 
network is that a bank's depositors will be able to use ATMs at many 
more locations than one bank alone could practicably support. The areas 
a bank seeks to serve through a shared ATM network include the areas in 
which its depositors live, work and ship, and the broader areas in 
which they move regularly. A bank's ability to offer its depositors 
access to other bank's ATMs, and thereby to offer its depositors 
convenient access to their accounts, is in most bankers' view necessary 
to attract and retain deposits. A bank--particularly a small bank, 
thrift or credit union with one or only a few offices--would be at a 
competitive disadvantage if it could not offer its depositors access to 
many conveniently located ATMs. Because no other service constitutes a 
reasonably close substitute for regional ATM network access, regional 
ATM networks constitutes a product market and a line of commerce within 
the meaning of the antitrust laws.
    19. The MAC network is the dominant ATM network in the affected 
states. In Pennsylvania, New Jersey and Delaware, more than 90% of the 
ATMs are connected to MAC; in New Hampshire, approximately 80% of the 
ATMs are connected to MAC. No other regional network has a significant 
presence in Pennsylvania, Delaware, West Virginia or New Hampshire. 
Although the New York Cash Exchange (``NYCE``) ATM network has a 
presence in New Jersey, for reasons set forth below, EPS's MAC network 
nonetheless has monopoly or market power in New Jersey.
    20. Nearly all banks in the affected states believe they have no 
choice but to participate in the MAC network. Banks in the affected 
states affiliate with MAC because MAC is the only ATM network that 
provides ubiquitous ATM network access throughout all or most of the 
contiguous affected states. Banks that do not seek to provide regional 
ATM network access in areas smaller than these States do not have 
significantly greater alternatives than do statewide banks.
    21. Banks in the affected states often obtain ATM network access 
from MAC even though defendant's switching and processing fees, and 
other costs of doing business with MAC, are higher than those charged 
by other networks and by independent processors. Defendant has market 
power in the market for regional ATM network access in the affected 
states. That market power is of sufficient size and durability to 
constitute monopoly power.
    22. Until 1992, MAC generally did not permit its customers to 
participate in rival ATM networks while also participating in MAC. 
While the rule against multiple affiliations was formally dropped in 
1992, MAC engages in practices that make it impractical for many 
participating banks--particularly smaller banks--to belong to a rival 
network while belonging to MAC. In particular, MAC requires banks 
either to obtain ATM driving from defendant or to provide ATM driving 
in-house as intercept processors, which is prohibitively expensive for 
many smaller banks, thrifts and credit unions. MAC generally forbids 
its network customers from obtaining ATM driving from any of the 
several data processing firms that provide that service in a national 
market.
    23. There are several regional and national firms in the business 
of ATM processing that could and would seek to compete to provide ATM 
driving services to MAC network members. Absent MAC's prohibition, many 
MAC customers would seek to obtain ATM processing from these or other 
firms. Defendant's rules and practices thus prevent willing buyers and 
sellers from conducting business at competitively determined prices and 
terms.
    24. Once defendant drives a bank's ATM, defendant can prevent that 
bank from connecting its ATM to another network. To connect to a 
network other than MAC, MAC must establish the connection. MAC 
generally has not provided connections to the ATM networks that would 
be its strongest competitors.
    25. The anticompetitive effects of MAC's ``no-third-party-
processing'' rule are twofold.
    a. First, it excludes competitors from the market for ATM 
processing in areas where MAC has market power in the market for ATM 
network access, extending the exercise of that market power into the 
processing market and permitting MAC to charge higher prices--which it 
does both directly and indirectly; and
    b. Second, by preventing many banks from participating in networks 
other than MAC, the rule makes it substantially more difficult for 
other networks to enter into MAC's areas of dominance to compete with 
MAC. The rule therefore serves to exclude competitors and maintain 
MAC's monopoly power.
    26. The rule against third party processing is not necessary to 
obtain any efficiencies or quality control assurances that could not 
reasonably be obtained through less anticompetitive means. MAC allows 
some of its largest members to use third party processors, and permits 
those third party processors to connect to MAC, but will not allow 
those same third party processors to prove ATM driving services to 
other smaller MAC customers.

First Violation Alleged

    27. The United States repeats and realleges the allegations of 
paragraphs 1 to 26 herein.
    28. The provision by defendant of ATM network access and processing 
services pursuant to MAC's rules, constitute an agreement or agreements 
within the meaning of Section 1 of the Sherman Act.
    29. Regional ATM network access and ATM processing are separate 
products.
    30. Defendant has market power in the market for regional ATM 
network access in the affected states.
    31. The amount of commerce affected in the market for ATM 
processing in the affected states is substantial.
    32. Defendant's rules and practices act to force many of its ATM 
network access customers to purchase ATM processing from defendant, 
rather than from other firms of the customer's choosing.
    33. Defendant's tying arrangement unreasonably restrains trade and 
is unlawful per se under Section 1 of the Sherman Act.

Second Violation Alleged

    34. The United States repeats and realleges the allegations of 
paragraphs 1 to 33 herein.
    35. Defendant possesses substantial monopoly power in the market 
for regional ATM network access in the affected states.
    36. Defendant willfully has maintained its monopoly power in the 
market for regional ATM network access in the affected states through 
exclusionary practices.
    37. Defendant's actions and practices constitute unlawful 
monopolization under Section 2 of the Sherman Act.

Prayer for Relief

    Wherefore, plaintiff the United States prays that:
    a. Defendant be enjoined from requiring any depository institution 
that obtains ATM network access from defendant to obtain any ATM 
processing from defendant; from selling or contracting to see access 
to, membership in, or switching of transactions by the MAC network, on 
the condition, agreement, or understanding that the purchaser thereof 
shall not use or purchase ATM processing services from any other 
person; or from restricting in any manner, directly or indirectly, the 
ability of a depository institution to obtain ATM processing for access 
to the MAC ATM network from any person other than defendant;
    b. Defendant be enjoined to provide third party processors with 
nondiscriminatory access to the MAC switch that is at least equal in 
type and quality to the access MAC provides to intercept processors;
    c. Defendant be enjoined from discriminating in the pricing of 
access to the MAC network;
    d. The United States be granted such other structural, injunctive 
or further relief as this Court may deem just and proper; and
    e. The United States recover the costs in this action.

    Dated: April 21, 1994.
Anne K. Bingaman,
Assistant Attorney General.

Robert E. Litan,
Deputy Assistant Attorney General.

Mark C. Schechter,
Deputy Director of Operations, Antitrust Division, U.S. Department of 
Justice, Washington, DC 20530.

Richard L. Rosen,
Chief, Communications and Finance Section, Antitrust Division, 555 
Fourth Street, NW., Washington, DC.

Richard Liebeskind,
Assistant Chief, Communications & Finance Section.

Don Allen Resnikoff,
Attorney, Communications & Finance Section.

John J. Sciortino,
Attorney, Communications & Finance Section.

Kevin C. Quin,
Attorney, Communications & Finance Section, Antitrust Division, 555 
Fourth Street, NW., Washington, DC 20001, (202) 514-5628.

Richard G. Andrews,
United States Attorney.

Nina A. Pala,
Assistant United States Attorney, Delaware Bar No. 2622, District of 
Delaware, 1201 Market Street, Wilmington, Delaware 19801, (302) 573-
6277.

Stipulation

    It is hereby stipulated and agreed, by and between the undersigned 
parties, by their respective attorneys, that:
    1. The parties consent that a Final Judgment in the form hereto 
attached may be filed and entered by the Court, upon the motion of any 
party or upon the Court's own motion, at any time after compliance with 
the requirements of the Antitrust Procedures and Penalties Act, 15 
U.S.C. 16, and without further notice to any party or other 
proceedings, provided that plaintiff has not withdrawn its consent, 
which it may do at any time before the entry of the proposed Final 
Judgment by serving notice thereof on defendants and by filing that 
notice with the Court.
    2. The parties shall abide by and comply with paragraphs IV.J.4 and 
IV.J.5 of the proposed Final Judgment pending entry of the Final 
Judgment. The parties likewise shall abide by and comply with all other 
paragraphs of Section IV of the proposed Final Judgment pending its 
entry, provided that, not later than September 1, 1994, the public 
comment period provided for in 15 U.S.C. 16 shall have expired and the 
Department of Justice shall have filed with the district court its 
motion for entry of the proposed Final Judgment in its entirety and 
without modification.
    3. In the event plaintiff withdraws its consent or if the proposed 
Final Judgment is not entered pursuant to this Stipulation, this 
Stipulation will be of no effect whatever, and the making of this 
Stipulation shall be without prejudice to any party in this or any 
other proceeding.
    4. This Stipulation and the Final Judgment to which it relates are 
for settlement purposes only and do not constitute an admission by 
defendant in this or any other proceedings that Section 1 or 2 of the 
Sherman Act, 15 U.S.C. 1, 2, or any other provision of law, has been 
violated.
    Counsel for the Plaintiff:
Anne K. Bingaman,
Assistant Attorney General.

Robert E. Litan,
Deputy Assistant Attorney General.

Mark C. Schechter,
Deputy Director of Operations.

Antitrust Division,
U.S. Department of Justice, Washington, DC 20530.

Richard L. Rosen,
Chief, Communications & Finance Section.

U.S. Department of Justice,
Antitrust Division, Communications and Finance Section, 555 Fourth 
Street, NW., Washington, DC 20001.

Richard Liebeskind,
Assistant Chief.

John J. Sciortino,
Don Allen Resnikoff, Kevin C. Quin, Attorneys.

U.S. Department of Justice,
Antitrust Division, Communications and Finance Section, 555 Fourth 
Street, NW., Washington, DC 20001, (202) 514-5628.

Richard G. Andrews,
United States Attorney, District of Delaware.

    Counsel For the Defendants:
Stephen Paul Mahinka,
Morgan, Lewis & Bockius, 1800 M Street NW., Washington DC 20036, (202) 
467-7205.

Nina A. Pala,
Assistant United States Attorney, Delaware Bar No. 2622, District of 
Delaware, 1201 Market Street, Wilmington, Delaware 19801, (302) 573-
6277.

Brett D. Fallon,
Smith, Katzenstein & Furlow, Delaware Bar No. 2480, 1220 Market Street, 
5th Floor, Wilmington, Delaware 19801, (302) 652-8400.

    Dated: April 21, 1994.

Final Judgment

    Whereas Plaintiff, United States of America, having filed its 
Complaint in this action on April 21, 1994, and plaintiff and 
defendant, by their respective attorneys, having consented to the entry 
of this Final Judgment without trial or adjudication of any issue of 
fact or law; and without this Final Judgment constituting any evidence 
or admission by any party with respect to any issue of fact or law;
    And whereas defendant has agreed to be bound by the provisions of 
this Final Judgment pending its approval by the Court;
    Now, therefore, before any testimony is taken, and without trial or 
adjudication of any issue of fact or law, and upon consent of the 
parties, it is hereby
    Ordered, adjudged and decreed as follows:

I

Jurisdiction

    This Court has jurisdiction of the subject matter of this action 
and of the person of the defendant. The Complaint states a claim upon 
which relief may be granted against the defendant under Sections 1 and 
2 of the Sherman Act, 15 U.S.C. Sec. 1, 2.

II

Definitions

    As used in this Final Judgment:
    A. ``Defendant'' and ``EPS'' means defendant Electronic Payment 
Services, Inc., its divisions, subsidiaries, affiliates, agents, 
officers, employees, successors and assigns, and without restriction 
means the business currently known as ``Money Access Service'' or 
``MAC,'' its employees, agents, officers, and any successor or assign 
of that business or any significant portion of the assets of that 
business. ``Defendant'' also includes all persons made subject to this 
Final Judgment pursuant to Section III hereof.
    B. ``ATM'' means automatic teller machine, a machine typically 
owned and deployed by a depository institution, and used by depositors 
of that institution and others to withdraw cash and, in certain 
configurations, to perform one or more of the following additional 
functions: account inquiry, payment authorization, transfer or deposit.
    C. ``ATM network'' means an arrangement whereby more than one ATM 
and more than one depository institution (or the deposit records of 
such depository institutions) are interconnected by electronic or 
telecommunications means, to one or more computers, processors or 
switches for the purpose of providing ATM services to the retail 
customers of depository institutions.
    D. ``ATM processing'' means providing the data processing services 
and telecommunications facilities and services used:
    1. To operate, monitor and support the operation of ATMs deployed 
by a depository institution;
    2. To connect the ATMs deployed by a depository institution to that 
institution's deposit authorization records, for authorization and 
confirmation of ``on-us transactions,'' and the recordkeeping and other 
functions related to such transactions; and
    3. To connect the ATMs deployed by a depository institution to one 
or more branded ATM networks for authorization and confirmation of 
``on-others transactions,'' and the recordkeeping and other functions 
related to such transactions.

ATM processing can be provided as a service distinct from branded ATM 
network access, and can be performed in the facilities of the ATM 
switch, a depository institution's own facilities, or in the facilities 
of a data processing service organization.
    E. ``ATM switch'' means a telecommunications and data processing 
facility used to receive and route transactions from ATMs or ATM 
processors to data processing facilities used by depository 
institutions to authorize ATM transactions. A ``MAC switch'' is an ATM 
switch operated by or on behalf of, or providing such functionality for 
branded ATM network access to, the MAC or any successor branded ATM 
network controlled by defendant.
    F. ``Authorization processing'' means providing the data processing 
services and telecommunications facilities and services used to connect 
a branded ATM network to a depository institution's deposit 
authorization records, for authorization and confirmation of ATM 
transactions, and the recordkeeping and other functions related to such 
transactions.
    G. ``Branded ATM network access'' means access to an ATM network 
identified by a common trademark or logo displayed on ATMs and ATM 
cards, and includes the offering for sale of the ability for an ATM 
card holder with an account at one member depository institution to 
request withdrawal, deposit, payment authorization, transfer or account 
inquiry transactions at an ATM identified by a network's trademark or 
logo owned by another member depository institution; transaction 
switching by an ATM switch; and the right to brand ATMs or ATM cards 
with the trademark or logo of an ATM network.
    H. ``Depository institution'' means a bank, savings bank, savings 
and loan association, credit union or other institution authorized by 
federal or state law to take deposits. For the purpose of this Final 
Judgment, ``depository institution'' also includes any other member of 
a branded ATM network operated by defendant that also deploys ATMs 
within that network.
    I. ``Intercept processor'' means a depository institution that 
provides ATM processing for itself.
    J. ``MAC'' means Money Access Service, the branded ATM network 
owned, controlled and operated by EPS, or any successor brand to 
``MAC.''
    K. ``MAC Midwest Platform'' means MAC's data facility (or 
facilities) that on October 1, 1994, provides branded ATM network 
access to depository institutions located in the States of Illinois, 
Indiana, Kentucky, Michigan, Ohio and Tennessee, and at least the 
greater number of the depository institutions in the State of West 
Virginia that are branded ATM network customers of defendant.
    L. ``Person'' means any natural person, corporation, firm, company, 
sole proprietorship, partnership, association, institute, governmental 
unit, or other legal entity.
    M. ``Third party processor'' means any person that currently or in 
the future offers ATM processing services to depository institutions. 
Third party processors may include both depository institutions 
providing ATM processing for other depository institutions and firms 
unaffiliated with depository institutions that provide such services. A 
third party processor is ``qualified'' within the meaning of this Final 
Judgment if it is qualified within the meaning of Section IV.E below.

III

Applicability

    The Final Judgment shall apply to defendant and each of its 
affiliates, subsidiaries, officers, directors, employees, agents, 
successors, and assigns; to any successor to any substantial part of 
the MAC business; to any entity that controls defendant as control 
currently is defined under the Hart-Scott-Rodino Antitrust Improvements 
Act of 1976 and its implementing regulations (see 16 CFR 801.1(b)); and 
to all persons acting in concert with defendant and having actual 
notice of this Final Judgment.

IV

Prohibited Conduct

    Defendant is permanently enjoined and restrained as follows:
    A. Defendant shall not require any depository institution that 
obtains branded ATM network access from defendant to obtain any ATM 
processing or authorization processing from defendant. Defendant shall 
not maintain or enforce any rule, policy, contract, agreement or 
arrangement pursuant to which defendant requires any depository 
institution to obtain ATM processing or authorization processing from 
defendant; that prohibits or purports to prohibit a depository 
institution from obtaining ATM processing or authorization processing 
from any third party processor; or that conditions MAC membership or 
availability of MAC or any successor branded ATM network access on any 
depository institution's obtaining ATM processing or authorization 
processing from defendant or not obtaining ATM processing or 
authorization processing from a qualified third party processor.
    B. Defendant shall not sell or contract to sell access to, 
membership in, or switching of transactions by the MAC or any successor 
branded ATM network controlled by defendant, on the condition, 
agreement, or understanding that the purchaser thereof shall not use or 
purchase ATM processing or authorization processing services from any 
other person.
    C. Defendant shall not establish as any condition, agreement, or 
understanding with respect to access to, membership in, or switching of 
transactions by the MAC or any successor branded ATM network controlled 
by defendant, or the price or terms of such access, membership, or 
switching, that the purchaser thereof shall not use or purchase ATM 
processing or authorization processing services from any other person. 
Defendant shall not impose any additional fees on any depository 
institution based on its obtaining ATM processing or authorization 
processing from any person other than defendant, except that defendant 
may impose additional fees for set-up and establishment of the network. 
Defendant will not require an unreasonable amount of set-up and 
establishment testing and certification. The aggregate of set-up and/or 
establishment fees charged to a depository institution, as allowed by 
this paragraph, and/or its third party processor, as allowed by 
paragraph IV.E.2 of this Final Judgment, shall not exceed $100 per 
person hour expended by Defendant up to a maximum of $1,000 unless 
significant difficulties that require additional work are caused by the 
third party processor or the depository institution. In such case, 
Defendant will charge $100 per hour for the next 40 person hours and 
$250 per hour for each additional hour that it expends. The hourly 
rates and maximum fees set forth in this paragraph may be adjusted over 
the term of this Final Judgment in accordance with the Consumer Price 
Index.
    D. Defendant shall not restrict in any manner, directly or 
indirectly, the ability of a depository institution to obtain ATM 
processing or authorization processing for access to the MAC or any 
successor branded ATM network controlled by defendant from any 
qualified third party processor. Defendant shall not require any 
depository institution that obtains ATM processing or authorization 
processing from a third party processor to obtain any other service 
that is not required to provide such ATM or authorization processing 
from that processor or from any other person.
    E. Defendant shall provide qualified third party processors with 
nondiscriminatory branded ATM network access to the MAC or any 
successor branded ATM network controlled by defendant that is at least 
equal in type and quality to the access defendant: (a) Provides to 
intercept processors, and (b) provided to intercept processors as of 
the date of the commencement of this action. Defendant shall not deny 
any qualified third party processor access to telecommunications ports 
or links necessary for the third party processor to provide ATM 
processing or authorization processing for depository institutions 
obtaining ATM network access from defendant. Defendant shall permit 
qualified third party processors to aggregate transactions of multiple 
banks over one or several telecommunications links and ports as 
technically reasonable, and defendant shall not require third party 
processors to obtain a separate link or port for each of its depository 
institution customers. A third party processor is qualified, within the 
meaning of this Final Judgment, if it completes defendant's 
certification process and meets:
    1. The technical, financial and operating criteria for intercept 
processors and third party processors that provide services to only one 
depository institution established by defendant and in effect as of the 
date of commencement of this action, or such other reasonable and 
nondiscriminatory technical, financial and operating criteria for 
intercept processors and third party processors hereafter established 
by defendant; and
    2. Such additional technical criteria regarding transaction 
information transmitted and the format for transmission of such 
information as is reasonably appropriate for third party ATM processing 
for unaffiliated multiple banks. No such criteria shall distinguish or 
discriminate between intercept processors and third party processors, 
except that volume discounts may be offered in a nondiscriminatory 
manner as provided in paragraph IV.G of this Final Judgment. Defendant 
shall not require any third party processor to satisfy additional 
certification requirements, or pay additional certification fees (other 
than reasonable set-up fees), by reason of its seeking or obtaining the 
business of additional customers as long as the processor elects to 
employ for these additional customers a message format/communications 
protocol combination for which defendant already has certified the 
processor.

Notwithstanding the foregoing, Defendant is not required to certify as 
a qualified processor any branded ATM network that is dominant on a 
state-wide basis or a subsidiary of such network that seeks to become a 
qualified processor in the MAC or any successor branded ATM network 
controlled by Defendant unless reciprocal access to become a processor 
in that network is available on a substantially similar basis as to 
pricing and terms to all qualified third party processors including 
other branded ATM networks that offer third party ATM or authorization 
processing to depository institutions.
    F. Defendant shall not terminate any third party processor's access 
to the MAC or any successor branded ATM network controlled by defendant 
except on written notice to the processor thirty (30) days before such 
termination, except that Defendant can terminate any processor 
immediately if that processor: (1) Fails to pay at any time specified 
fees, charges or other amounts due and owed to defendant or any 
participant in defendant's branded ATM network; (2) violates any law or 
government regulation applicable to it that has adverse effect upon the 
MAC or any successor branded ATM network controlled by defendant; (3) 
has a bankruptcy or insolvency proceeding filed against it; or (4) 
appoints or has appointed by court order a trustee or receiver for any 
substantial part of its property. Defendant shall provide a copy of any 
notice of termination to the Antitrust Division of the Department of 
Justice, to the attention of counsel of record or their named 
successors. Any termination in violation of this Final Judgment shall 
constitute a contempt of this Court and be punishable thereby.
    G. Defendant shall not discriminate in the pricing of branded ATM 
network access to the MAC or any successor branded ATM network 
controlled by defendant on the basis of a customer's choice of ATM 
processor, but shall offer branded ATM network access on a 
nondiscriminatory basis, except that:
    1. Defendant may offer volume discounts on branded ATM network 
access fees on a nondiscriminatory basis, provided that defendant shall 
permit any depository institution or third party processor for a 
depository institution to aggregate that institution's transaction 
volume delivered to a MAC switch, and any such depository institution 
shall be entitled to any such nondiscriminatory volume discount. 
Defendant shall not offer volume discounts to a depository institution 
operating as an intercept processor that are more favorable than those 
offer to a depository institution that obtains ATM or authorization 
processing from a qualified third party processor.
    2. Defendant shall be permitted to offer depository institutions 
the option of obtaining transaction switching between member depository 
institutions by third party processors at nondiscriminatory royalties 
that shall not be greater than the price for switched transactions.
    3. Defendant shall provide branded ATM network access pursuant to a 
nondiscriminatory price schedule applicable at least to depository 
institutions located in the States of Pennsylvania, New Jersey, and 
Delaware. Defendant's provision of branded ATM network access in States 
other than Pennsylvania, New Jersey, and Delaware, pursuant to a 
nondiscriminatory price schedule in one State, shall not be deemed to 
be discriminatory by reason of the use of a different price schedule in 
another State.
    H. Defendant shall not restrict in any manner the ability of a 
depository institution to obtain branded ATM network access through 
qualified third party processors or through their own intercept 
processor facilities to multiple providers of branded ATM network 
access. Defendant shall not condition its provision of branded ATM 
network access on a depository institution's not obtaining branded ATM 
network access from any other person. Defendant shall not sell or 
contract to sell access to, membership in, or switching of transactions 
by any branded ATM network controlled by defendant, on the condition, 
agreement, or understanding that the purchaser thereof shall not use or 
purchase branded ATM network access from any other person, or establish 
a price for, discount from, or rebate upon access to, membership in, or 
switching of transactions by the MAC or any successor branded ATM 
network controlled by defendant, on the condition, agreement, or 
understanding that the purchaser thereof shall not use or purchase 
branded ATM network access from any other person. Defendant shall in no 
manner restrict any depository institution ATM deployer that chooses to 
be affiliated with multiple ATM networks from displaying multiple ATM 
network logos on its ATMs. Defendant shall not prohibit any depository 
institution ATM card issuer located in the States of Pennsylvania, New 
Jersey, Delaware, Indiana or Ohio that chooses to be affiliated with 
multiple ATM networks from issuing cards that display multiple ATM 
network logos. Notwithstanding the preceding, Defendant may require 
that its ATM network logo be displayed on ATMs and ATM cards in equal 
frequency and prominence as the logos of any other ATM networks and may 
restrict the branding of access cards that contain an integrated 
circuit computer chip with a stored value function. Defendant shall in 
no manner restrict any depository institution ATM deployer from 
enabling ATMs to function in multiple ATM networks.
    I. Notwithstanding the preceding, defendant is not enjoined from 
entering into an agreement, not inconsistent with the terms of this 
Final Judgment, for the provision of ATM processing or authorization 
processing to any depository institution to which defendant has 
provided actual notice of, and a true copy of, this Final Judgment. Any 
such agreement shall be severable from any agreement to provide branded 
ATM network access to the MAC or any successor branded ATM network 
controlled by defendant.
    J. The injunctions specified in Sections IV.A through IV.E of this 
Final Judgment shall become effective as provided by the terms of this 
paragraph:
    1. Defendant shall commence certification of third party processors 
not later than January 1, 1995, except that defendant shall commence 
certification of processors in the MAC Midwest Platform not later than 
October 1, 1994.
    2. Each third party processor who seeks certification shall be 
allowed to complete certification in a reasonably prompt manner and 
within the range of time common in the industry, and shall not be 
denied such resources under the control of defendant (e.g., test time) 
as are necessary for certification. Upon a third party processor's 
completion of certification, such processor shall be permitted to act 
as a qualified third party processor in the MAC network, except that 
defendant is not required by this paragraph IV.J.2, prior to January 1, 
1995, to permit a third party processor that completes certification in 
the MAC Midwest Platform to act as a qualified third party processor 
for depository institutions not located in the States of Illinois, 
Indiana, Kentucky, Michigan, West Virginia or Ohio, or depository 
institutions located in the State of West Virginia but not served by 
defendant through the MAC Midwest Platform as of the date of 
commencement of this action.
    3. Sections IV.A through IV.E of this Final Judgment shall be 
effective and in force, as to any third party processor and the 
depository institution customers of such processor, as of the date upon 
which such third party processor becomes a qualified third part 
processor.
    4. Sections IV.A through IV.E of this Final Judgment shall be 
effective and in force as of the date of entry of this Final Judgment 
in any portion of the MAC or any successor ATM network controlled by 
defendant in which depository institutions had the option of using 
third party multi-bank ATM processors as of January 1, 1993. Defendant 
shall not renounce or deny any right that it previously granted to 
depository institutions to obtain ATM processing or authorization 
processing from third party processors.
    5. Defendant shall not take steps to prevent or discontinue any 
existing arrangements whereby third party processors provide ATM 
processing or authorization processing in connection with branded ATM 
network access as of January 1, 1993.

V

Sanctions

    Nothing in this Final Judgment shall bar the United States from 
seeking, or the Court from imposing, against any defendant or person 
any relief available under any applicable provision of law.

VI

Plaintiff Access

    A. To determine or secure compliance with this Final Judgment and 
for no other purpose, duly authorized representatives of the plaintiff 
shall, upon written request of the Assistant Attorney General in charge 
of the Antitrust Division, and on reasonable notice to the defendant, 
be permitted:
    1. access during the defendant's office hours to inspect and copy 
all records and documents in its possession or control relating to any 
matters contained in this Final Judgment; and
    2. to interview the defendant's officers, employees, trustees, or 
agents, who may have counsel present, regarding such matters. The 
interviews shall be subject to the defendant's reasonable convenience 
and without restraint or interference from defendant.
    B. Upon the written request of the Assistant Attorney General in 
charge of the Antitrust Division, a defendant shall submit such written 
reports, under oath if requested, relating to any of the matters 
contained in this Final Judgment as may be reasonably requested.
    C. No information or documents obtained by the means provided in 
this Section VI shall be divulged by the plaintiff to any person other 
than a duly authorized representative of the executive branch of the 
United States, except in the court of legal proceedings to which the 
United States is a party, or for the purpose of securing compliance 
with this Final Judgment, or as otherwise required by law.

VII

Further Elements of Decree

    A. Defendant shall provide actual notice and a true copy of this 
Final Judgment to each depository institution to which it provides 
branded ATM network access as of the date of this Final Judgment.
    B. Jurisdiction is retained by this Court for the purpose of 
enabling any of the parties to this Final Judgment to apply to this 
Court at any time for further orders and directions as may be necessary 
or appropriate to carry out or construe this Final Judgment, to modify 
or terminate any of its provisions, to enforce compliance, and to 
punish violations of its provisions.
    C. This Final Judgment shall terminate ten years from the date of 
entry.
    D. Entry of this Final Judgment is in the public interest.

    Dated: Wilmington, Delaware
U.S.D.J.

Competitive Impact Statement

    The United States, pursuant to Section 2(b) of the Antitrust 
Procedures and Penalties Act (``APPA'' or ``Tunney Act''), 15 U.S.C. 
16(b), files this Competitive Impact Statement relating to the proposed 
Final Judgment submitted for entry in this civil antitrust proceeding.

I

Nature and Purpose of the Proceedings

    On April 21, 1994, the United States filed a civil antitrust 
complaint pursuant to Section 4 of the Sherman Act, as amended, 15 
U.S.C. 4, against defendant Electronic Payment Services, Inc. 
(``EPS''), owner of the Money Access Service (``MAC'') regional 
automatic teller machine (``ATM'') network.\1\ The complaint alleges 
that EPS's refusal to allow the MAC network's bank customers\2\ to 
obtain ATM processing services from providers other than EPS violates 
the antitrust laws.
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    \1\EPS is a Delaware corporation owned by four bank holding 
companies: CoreStates Financial Corporation, Philadelphia, 
Pennsylvania; PNC Financial Corporation, Pittsburgh, Pennsylvania; 
Banc One Corporation, Columbus, Ohio; and KeyCorp, Albany, New York 
(successor to Society Corporation, Cleveland, Ohio). These four bank 
holding companies consolidated their various ATM networks (MAC, Owl, 
Jubilee and Green Machine) into EPS. MAC had previously been owned 
entirely by CoreStates. EPS plans to add two other equity owners: 
Mellon Bank Corporation and National City Corporation.
    \2\The customers of an ATM network are the depository 
institutions (banks, savings banks, savings and loan associations 
and credit unions) that seek to give their depositors access to an 
ATM network. These depository institutions are referred to 
collectively as ``banks'' in this Competitive Impact Statement.
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    The complaint's two counts allege: (1) That a business practice of 
EPS is a tying arrangement that is per se unlawful under Section 1 of 
the Sherman Act, as amended, 15 U.S.C. 1, and (2) that this typing 
arrangement is a means by which EPS has maintained a monopoly in 
regional ATM network access in the States of Pennsylvania, New Jersey, 
Delaware, West Virginia and New Hampshire, and in substantial portions 
of the State of Ohio (the ``affected states''), in violation of Section 
2 of the Sherman Act, as amended, 15 U.S.C. 2.
    The effect of this practice is to foreclose competition from 
competing data processing companies in the affected states. 
Furthermore, because those competing data processing companies would 
otherwise provide means by which MAC member banks could access 
competing regional ATM networks, this practice has the effect of 
excluding those networks and maintaining EPS's monopoly in regional ATM 
network access in the affected states. The complaint seeks an 
injunction prohibiting EPS from continuing the tying arrangement, and 
other relief.
    On April 21, 1994, the United States and EPS filed a Stipulation by 
which the parties consented to entry of the attached proposed Final 
Judgment. This Final Judgment, as explained more fully below, enjoins 
EPS from requiring any of its regional ATM network customers to 
purchase ATM processing from EPS.
    The United States and EPS have stipulated that the proposed Final 
Judgment may be entered after compliance with the Tunney Act, unless 
the government withdraws its consent. Entry of the proposed Final 
Judgment would terminate this action, except that the Court would 
retain jurisdiction to construe, modify, and enforce the proposed Final 
Judgment and to punish violations thereof.

II

Facts Giving Rise to the Alleged Violation

    The Antitrust Division of the United States Department of Justice 
has conducted an extensive investigation of EPS's business practices. 
That investigation shows the following:
A. Background
    1. ATMs and ATM Networks. ATMs are machines typically owned and 
deployed by banks and used by their depositors with ATM cards most 
frequently to withdraw cash, but also to accomplish balance inquiries, 
deposits, payment authorizations, and transfers. An ATM network is an 
electronic telecommunications systems connecting various banks, their 
ATMs, and data processing companies, which allows an account holder of 
one bank to accomplish transactions at ATMs not owned by that bank.\3\
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    \3\Some banks and bank holding companies operate switches 
connecting only the ATMs deployed by branches of their own bank or 
their subsidiary banks, rather than connecting to non-affiliated 
banks. These networks are also generally referred to as ATM 
networks. However, in this Competitive Impact Statement, the term 
``network'' is used to refer to what is sometimes called a ``shared 
network,'' in that it connects multiple non-affiliated banks.
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    Most ATM networks are ``regional,'' operating in areas encompassing 
a state or several contiguous states. ATMs and ATM cards within the 
regional ATM network display a mark or brand identifying the network, 
so that depositors can identify the ATMs from which they may access 
their accounts. National ATM networks exist, but these are by design 
networks of last resort, used only where the two banks involved in a 
transaction do not both belong to any one regional ATM network. 
National ATM network transactions are typically more expensive, and 
those networks provide only a subset of the transactions available 
through regional ATM networks.
    An ATM network allows banks to provide their depositors with 
ubiquitous, 24-hour access to their accounts. A bank that becomes a 
member of a regional ATM network can offer its depositors access to 
their accounts not just at the bank's own ATMs, but also at other 
banks' ATMs. Bankers believe that the ability to offer depositors the 
convenience of access to their accounts at other banks' ATMs is 
necessary to attract and retain deposits. A bank--especially a small 
bank, thrift or credit union with one or only a few offices, and that 
deploys few, if any, ATMs--would be at a significant competitive 
disadvantage without the ability to offer its depositors access to many 
conveniently located ATMs. No other service is a close substitute for 
regional ATM network access, and regional ATM network access 
constitutes a product market within the meaning of the antitrust laws.
    2. ATM processing. ``ATM processing'' consists of the data 
processing services and telecommunications facilities and services used 
to operate, monitor and support the operation of ATMs deployed by a 
bank. ATM processing also involves the connection of the ATMs deployed 
by a bank to that bank's deposit records, for authorization and 
confirmation of that bank's depositors' transactions, and the 
connection of the ATMs deployed by a bank to one or more ATM networks 
for authorization and confirmation of other banks' depositors' 
transactions. Finally, ATM processing connects ATMs to an ATM network 
or to several ATM networks.
    A bank can purchase this ATM processing service from a regional ATM 
network or from an independent data processing company (``third party 
processor''), or can provide this processing service to itself (as an 
``intercept processor''). However, a bank must deploy a large number of 
ATMs before it becomes economical to provide ATM processing internally. 
Accordingly, small banks, thrifts, and credit unions very rarely act as 
intercept processors.
    3. Competitive effects of third party processors. Third party 
processors provide banks, especially smaller ones, with a competitive 
source for ATM processing. Equally important, third party processors 
offer a channel for the entry of competing regional ATM networks. Third 
party processors typically maintain connections to several regional ATM 
networks, and those networks therefore can reach all of the banks 
connected to a third party processor. Accordingly, the cost of and 
barriers to entry of regional ATM networks fall dramatically.
    In addition, third party processors themselves are potential 
entrants. Because a third party processor could switch transactions 
among its customer banks itself (a process known as ``subswitching'') 
rather than passing those transactions to the network switch, it is a 
potential ``unbranded'' ATM network. To become a competitor to the 
existing branded regional ATM networks, the third party processor need 
only put its brand on the ATMs and ATM cards of its customer banks and 
begin switching transactions.
B. EPS and Its Actions
    The complaint alleges that EPS has monopoly power in ATM network 
access in the affected states, and that EPS has illegally tied the sale 
of access to its MAC regional ATM network to the sale of the ATM 
processing for many of EPS's bank customers. The complaint also alleges 
that this illegal tying arrangement has worked to maintain EPS's 
monopoly power in the market for regional ATM network access in the 
affected states. This section, discusses EPS's actions and their 
anticompetitive effects in more detail.
    1. Elimination of ATM processing competition. EPS requires its 
member banks to purchase ATM processing services from EPS or provide it 
themselves as intercept processors.\4\ The effect of this rule is that 
small banks, thrifts, and credit unions--banks that cannot economically 
become intercept processors--are forced to purchase ATM processing from 
EPS. This rule has foreclosed third party processors from competing for 
banks' ATM processing business within the MAC regional ATM network.
---------------------------------------------------------------------------

    \4\Under MAC's rules, only those banks which have previously 
been intercept processors can obtain ATM processing from third party 
processors.
---------------------------------------------------------------------------

    EPS's exclusion of third party processor competition from the MAC 
network has allowed EPS to exact very high profits from small banks, 
thrifts and credit unions. EPS has done so via two sorts of fees. 
First, and most directly, EPS charges much more per ATM for ATM 
processing than third party processors typically charge. Second, EPS 
increases its own switching volume and revenues by prohibiting third 
party processing. Where EPS drives a bank's ATMs, every transaction at 
those ATMs passes through the MAC switch and is charged to the bank as 
a switched transaction, including those transactions by the bank's own 
depositors (its ``on-us'' transactions). In contrast, intercept 
processors and banks that use third party processors do not send on-us 
transactions to a network switch. If banks could use third party 
processors, MAC would not process, or collect switch fees, for those 
on-us transactions. Without third party processors, EPS's switch volume 
and switch fee revenues are commensurately higher.
    EPS's switch fees hit hardest those MAC banks with the fewest ATM 
processing options. EPS banks large enough to be intercept processors 
escape the EPS charge for ``on-us'' transactions, and only pay MAC 
switch fees when their depositors use other banks' ATMs. The smaller 
banks that cannot afford to be intercept processors pay switch fees for 
a much higher proportion of their depositors' transactions. EPS takes 
advantage of this by imposing on its membership the steepest switch fee 
schedule in the industry.\5\ The result is that the small banks that 
are forced--by EPS's third party processing restriction--to send all 
their ATM transactions to the MAC switch must also pay very high fees 
for the switching of those transactions.
---------------------------------------------------------------------------

    \5\MAC switch fees range from a low of 5 cents (what large 
member banks with a large number of ATMs and transactions pay) to a 
high of 25 cents (what the smaller banks with fewer ATMs and 
transactions--the ones effected by EPS's third party processing 
restriction--usually must pay). No other major regional ATM network 
excludes third party processors, and all have much flatter switch 
fee schedules: e.g. Star, 3.5 cents to 8 cents; NYCE, 6 cents to 
13 cents; Honor, 2 cents to 10 cents; Most, 3.5 cents to 14 cents; 
Pulse 6 cents; Accel/Exchange, 12 cents; Yankee 24, 12 cents; and 
Magic Line, 12 cents. ``EFT Switch Fee Slide May Be Nearing Its 
End,'' Bank Network News (Jan. 27, 1993).
---------------------------------------------------------------------------

    2. Deterrence of entry by competitor regional ATM networks. The 
complaint alleges that a further anticompetitive effect of the illegal 
tying arrangement is to maintain EPS's market power in the market for 
regional ATM network access in the affected states. EPS's third party 
processor prohibition has insulated the MAC regional ATM network from 
the competitive influences of third party processors. This subsection 
gives a history of the MAC network's largely successful efforts to keep 
competitors out of its core areas, and explains how EPS's current 
practice of excluding third party processors from the MAC network 
deters entry today.
    a. A History of anticompetitive practices. For most of its 
existence and until 1992, the MAC network explicitly prohibited its 
bank customers from belonging to other regional ATM networks. MAC 
combined this practice with a number of strategic purchases of adjacent 
regional ATM networks. These acquisitions, the prohibition on multiple 
regional ATM network affiliation, and the third party processor 
prohibition together proved to be a formidable force for keeping the 
affected states free from competition.
    b. Effect of the third party processor prohibition. EPS's third 
party processing prohibition forces small banks that cannot 
economically provide their own ATM processing to purchase the service 
from EPS. Because EPS effectively controls the communications links of 
their ATMs, these banks cannot connect their ATMs to other regional ATM 
networks without the assistance--and approval--of EPS. EPS therefore 
exercises an effective veto over these banks' access to other networks 
in the affected states, and conversely, other networks' access to these 
banks. Third party processors, on the other hand, often offer access to 
several regional ATM networks. If these banks were able to utilize 
third party processors, other regional networks would be much more 
likely to seek and obtain their business. EPS's control over access to 
other regional ATM networks prevents these networks from entering the 
affected states.\6\
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    \6\EPS offers its members``gateways'' through MAC to a few 
regional ATM networks, but controls the price and terms of this 
route of access. EPS does not offer gateways to most regional ATM 
networks operating in areas adjacent to the affected states, which 
would offer the greatest competition to MAC. Gateways therefore do 
not remove the entry barrier to regional ATM networks created by 
EPS's restrictions on third party processing.
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    EPS's exclusion of third party processors also prevents the 
establishment of new networks. As discussed above, if third party 
processing were allowed in the affected states, a third party processor 
could almost instantly form a new network simply by placing a new 
``brand'' on the ATMs and cards of its customer banks. The third party 
processor would then switch these banks' transactions itself. The MAC 
network would switch transactions in only two cases: (1) When a 
depositor of a bank connected to the third party processor used an ATM 
owned by a bank not connected to the third party processor; or (2) when 
a depositor of a bank not connected to the third party processor used 
an ATM owned by a bank connected to the third party processor.
    While EPS excludes third party processors from the MAC network, 
would-be entrant regional ATM networks are substantially unable to 
enter. The small banks that wish to join another network (which might 
offer ATM network access at lower prices) will not be able to do so 
unless the other network has enough of a presence to provide small 
banks' depositors with sufficient ubiquity and convenience. The entrant 
network, of course, cannot achieve the critical mass necessary to 
attract banks. Accordingly, EPS's third party processing restriction 
creates what economists call a ``collective action problem,'' and EPS's 
monopoly persists.
C. The Alleged Violations
    1. First claim for relief--tying. The actions and policies of EPS 
described above constitute a tying arrangement that is per se unlawful 
under Section 1 of the Sherman Act. An unlawful tying arrangement is 
one in which two separate products are sold together, the seller forces 
buyers to purchase these products together, the seller has market power 
in the tying product, and the tying arrangement prevents what would 
otherwise be a substantial amount of commerce in the tied product. 
Eastman Kodak Co. v. Image Technical Services, Inc., 112 S.Ct. 2072 
(1992); Jefferson Parish Hospital District No. 2 v. Hyde, 466 U.S. 2 
(1984).
    The two products in this case are regional ATM network access and 
ATM processing, which outside of MAC can be, and often are, purchased 
separately. As described above, however, EPS's practices force banks 
wishing to obtain membership in MAC, and thereby access to its regional 
ATM network, to also purchase ATM processing from MAC. Because MAC is 
the only ubiquitous regional ATM network in the affected states and 
banks will not forego access to such a network, EPS has market power in 
this tying product. Evidence gathered in the investigation indicates 
that there is substantial commerce in the tied product.
    2. Second claim for relief-monopolization. EPS's actions and 
practices also constitute monopolization in violation of Section 2 of 
the Sherman Act. An unlawful monopoly involves both the possession of 
monopoly power in the relevant market and the willful acquisition or 
maintenance of that power. Willful acquisition or maintenance of a 
monopoly is shown by conduct that excludes rivals on some basis other 
than efficiency, superior skill, foresight or industry. Aspen Skiing 
Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985); United States 
v. Grinnell Corp., 384 U.S. 563 (1966).
    As described above, EPS's MAC network is the only ubiquitous 
regional ATM network available to banks in the affected states, and 
banks cannot forego access to such a network. EPS's prohibition of 
third party processing and other practices prevents many banks from 
using competing regional ATM networks, and results in the exclusion of 
those networks. EPS's conduct therefore constitutes unlawful 
monopolization.

III

Explanation of the Proposed Final Judgments

    The proposed Final Judgment will end unlawful practices that 
substantially reduce competition in the markets for regional ATM 
network access and ATM processing. The injunctions of the proposed 
Final Judgment do so by removing substantial barriers to the entry of 
competition in the affected states. Removal of these barriers is the 
most effective means of providing current and future MAC member banks 
with additional options for the purchase of these services.
    These practices are enjoined, and these barriers are removed, by 
the injunctions of Section IV of the proposed Final Judgment, which 
require EPS to terminate its restrictions on the use of third party 
processors by MAC members, to ensure that qualified third party 
processors can obtain access to the MAC network, and to enable MAC 
members to join other regional ATM networks.
    Paragraphs A through D of Section IV require EPS to terminate its 
restrictions on the use of third party processors by MAC members. EPS 
is enjoined from requiring its members to purchase ATM processing from 
MAC, from forbidding the use of third party processors, from 
conditioning the price or other terms of MAC membership on the use or 
non-use of third party processors, and from restricting the ability of 
MAC members to obtain third party processing. EPA is also enjoined from 
charging any additional fees to MAC members for the use of third party 
processors.\7\
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    \7\The proposed Final Judgment permits EPS to charge an hourly 
fee for reasonably necessary work performed by its personnel in 
connection with a bank becoming the customer of a third party 
processor. The total charge may not exceed $1000 unless significant 
difficulties arise at the processor's or bank customer's end.
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    Paragrahs E and F of Section IV ensure that qualified third party 
processors will be able to access the MAC network in order to forward 
network transactions of their MAC member customers. To ensure that 
qualified third party processors will obtain adequate communications 
links to MAC, the links provided to third party processors must be 
provided on the same terms as the links MAC provides to its intercept 
processor customers.\8\ So that qualified third party processors can 
operate in the most efficient manner, EPS must, to the extent feasible, 
permit transactions from multiple banks to pass over a single 
communications link rather than requiring a separate link for each 
bank. Except under specified circumstances where immediate termination 
would be appropriate, EPS may not terminate a third party processor 
without providing 30 days notice, and it must provide a copy of the 
notice to the United States. This will give the United States an 
opportunity to examine the competitive consequences of any such 
termination.
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    \8\As explained in Section II.A.2 of this Competitive Impact 
Statement, intercept processors are generally the larger banks and 
therefore those that have the largest ATM transaction volumes. 
Accordingly, they provide the most revenue per bank to EPS, giving 
EPS a strong incentive to provide them adequate services, including 
communications links. Because EPS has an incentive to deal fairly 
with its intercept processor customers, several provisions of the 
decree concerning treatment by EPS of third party processors (and 
MAC members that use third party processors) are tied to EPS's 
treatment of intercept processors in similar circumstances. By using 
the treatment of intercept processors as a benchmark, the proposed 
Final Judgment avoids a detailed regulatory approach to these 
issues.
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    To allow EPS to ensure the quality of the MAC network, the proposed 
Final Judgment requires EPS to provide MAC network access only to 
qualified third party processors. As with the quality of communications 
links, the standards for qualification of third party processors are 
tied to MAC's qualification standards for intercept processors. A third 
party processor is qualified if it meets MAC's technical, financial and 
operating criteria for intercept processors and third party processors 
providing services to only one bank, and whatever additional technical 
criteria concerning the format and content of transmissions are 
appropriate for third party processors processing for multiple banks. 
These criteria may not discriminate between intercept and third party 
processors, nor may EPS charge additional fees to third party 
processors for certification.\9\
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    \9\As discussed in footnote 7, EPS may charge a one-time fee for 
reasonably necessary work it performs when a third party processor 
adds another bank. This charge, whether directed to the bank or the 
third party processor, may not exceed $1000.
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    Paragraph G of Section IV prevents EPS from discriminating in the 
price of ATM network access against MAC members that choose to utilize 
third party processors. The volume discounts available to members using 
third party processors must be the same as the volume discounts 
available to intercept processors. Also, EPS must use a single price 
schedule for banks in Pennsylvania, New Jersey and Delaware, the areas 
in which the MAC network has historically had the greatest monopoly 
power, and in which two of its principal owners (CoreStates and PNC) 
are located. By drawing this larger area, EPS may not favor its own 
stockholders in Pennsylvania without giving similar volume discounts to 
large banks in New Jersey and Delaware. EPS may use different price 
schedules in other states.
    The preceding injunctions will remove the restrictions EPS has 
imposed on MAC member banks in their choice of ATM processors, and 
thereby break the unlawful tie EPS has established between purchase of 
MAC ATM network services and purchase of ATM processing. The direct 
consequence will be to make the purchase of third party processing a 
realistic option for MAC members. This should bring about the entry of 
competitors to MAC for ATM processing. As discussed in Section II.A.3 
of this Competitive Impact Statement, third party processors often have 
links to many regional ATM networks, and so use of a third party 
processor by a bank can facilitate its joining of multiple ATM 
networks. Therefore, an indirect consequence of breaking the unlawful 
tie between MAC ATM network services and processing services will 
likely be an increase in competition in the markets for regional ATM 
network access in the affected states.
    To ensure that competition for ATM network services is in fact 
enhanced, Paragraph H of Section IV of the proposed Final Judgment 
enjoins EPS from restricting the ability of MAC members to access other 
networks through their own facilities or those of third party 
processors. While MAC itself is not required to establish gateways to 
competing networks, it may not hinder its members form joining other 
networks. EPS also may not condition the price or terms of MAC 
membership upon not joining another network. EPS must permit MAC 
members to display multiple network marks on ATMs and ATM cards, except 
for electronic stored value cards.\10\ The injunction against 
prohibiting multiple branding of ATMs applies in all areas where MAC 
operates; the injunction against prohibiting multiple branding of ATM 
cards applies only in the States of Pennsylvania, New Jersey, Delaware, 
Ohio and Indiana, areas in which MAC historically had monopoly power, 
or in which there is a dangerous probability that MAC might soon gain 
monopoly power.\11\
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    \10\Permitting EPS to restrict the multiple branding of 
electronic stored value cards will not lessen the procompetitive 
impact of the proposed Final Judgment, because the branding of 
ordinary ATM cards, which are by far more common, is not restricted. 
EPS maintains that allowing restrictive branding of electronic 
stored value cards will encourage innovation and competition in 
services among firms marketing such cards.
    \11\The United States believes that MAC also has monopoly power 
in New Hampshire and West Virginia. However, the United States 
believes that the proposed Final Judgment contains sufficient 
guarantees to open up those States to competition since there is 
substantial commerce between those States (or portions of them) and 
other regions in which MAC is not a significant competitor.
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    Portions of the proposed Final Judgment, including the section 
lifting EPS restrictions on the participation of MAC members in 
competing ATM networks, will take effect immediately upon entry. 
Paragraphs A through E of Section IV, which lift EPS restrictions 
concerning the use of third party processors, will take effect in two 
stages. On October 1, 1994, EPS must begin the certification process 
for third party processors in the MAC Midwest Platform. It must allow 
third party processors to complete certification in a reasonably prompt 
manner, after which these processors will be able to act as third party 
processors for banks in MAC's midwest region. On January 1, 1995, EPS 
must allow certified third party processors to act as third party 
processors for all banks in the MAC network, and it must begin the 
process of certifying third party processors in any remaining region. 
The delay between entry of the proposed Final Judgment and the 
effective dates of the injunctions provides EPS sufficient time to 
undertake the technical steps necessary to ensure that all regions of 
the MAC network will be able to accommodate third party processors.
    These provisions take effect immediately in any area where banks 
were permitted to use third party processors as of January 1, 1993. 
This prevents EPS from banning third party processing in recently 
acquired or soon to be acquired networks where third party processing 
has not been restricted. Also, EPS may not discontinue existing 
arrangements whereby MAC members use third party processors.
    The United States and EPS have stipulated that the proposed Final 
Judgment may be entered by the Court at any time after compliance with 
the APPA. The proposed Final Judgment constitutes no admission by 
either party as to any issue of fact or law. Under the provisions of 
Section 2(e) of the APPA, entry of the proposed Final Judgment is 
conditioned upon a determination by the Court that the proposed Final 
Judgment is in the public interest.

IV

Remedies Available to Potential Private Litigants

    Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any 
person who has been injured as a result of conduct prohibited by the 
antitrust laws may bring suit in federal court to recover three times 
the damages the person has suffered, as well as costs and reasonable 
attorneys fees. Entry of the proposed Final Judgment will neither 
impair nor assist the bringing of any private antitrust action under 
the Clayton Act. Under the provisions of Section 5(a) of the Clayton 
Act, 15 U.S.C. 16(a), the proposed Final Judgment has no prima facie 
effect in any private lawsuit that may be brought against the 
defendant.

V

Procedures Available for Modification of the Proposed Final Judgment

    The APPA provides a period of at least sixty (60) days preceding 
the effective date of the proposed Final Judgments within which any 
person may submit to the United States written comments regarding the 
proposed Final Judgment. Any person who wishes to comment should do so 
within sixty (60) days of the date of publication of this Competitive 
Impact Statement in the Federal Register. The United States will 
evaluate the comments, determine whether it should withdraw its 
consent, and respond to the comments. The comments and response(s) of 
the United States will be filed with the Court and published in the 
Federal Register.
    Written comments should be submitted to Richard Liebeskind, 
Assistant Chief, Communications and Finance Section, Antitrust 
Division, U.S. Department of Justice, 555 Fourth Street, NW., room 
8104, Washington, DC 20001.
    The proposed Final Judgment provides that the Court retains 
jurisdiction over this action, and any party may apply to the Court for 
any order necessary or appropriate for its modification, interpretation 
or enforcement.

VI

Alternatives to the Proposed Final Judgment

    As an alternative to the proposed Final Judgment, the United States 
considered litigation seeking structural relief, including division of 
the MAC network. The United States rejected that alternative because 
the termination of MAC's restrictive practices concerning use of third 
party processors and membership in multiple regional ATM networks will 
effectively break the unlawful tie established by EPS between ATM 
network access and ATM processing. Breaking this tie will encourage the 
entry of competitors in the affected states in the markets for ATM 
network services and ATM processing more efficiently than division of 
the MAC network. In addition, division of the MAC network was likely to 
involve the Court and the parties in a complex and time-consuming 
process of reorganizing the network, delaying the desired improvement 
in competition.
    The United States also recognized that such litigation would 
require determination of several disputed issues of law and fact, and 
that there could be no assurance that the position of the United States 
would prevail.

VII

Standard of Review Under the Tunney Act for Proposed Final Judgment

    The APPA requires that proposed consent judgments in antitrust 
cases brought by the United States are subject to a sixty-day comment 
period, after which the court shall determine whether entry of the 
proposed final judgment ``is in the public interest.'' In making that 
determination, the court may consider--

    (1) The competitive impact of such judgment, including 
termination of alleged violations, provisions for enforcement and 
modification, duration or relief sought, anticipated effects of 
alternative remedies actually considered, and any other 
considerations bearing upon the adequacy of such judgment;
    (2) The impact of entry of such judgment upon the public 
generally and individuals alleging specific injury from the 
violations set forth in the complaint including consideration of the 
public benefit, if any, to be derived from a determination of the 
issues at trial.

15 U.S.C. 16(e) (emphasis added). The courts have recognized that the 
term ``public interest'' ``take[s] meaning from the purposes of the 
regulatory legislation.'' NAACP v. Federal Power Comm'n, 425 U.S. 662, 
669 (1976). Since the purpose of the antitrust laws is to ``preserv[e] 
free and unfettered competition as the rule of trade,'' Northern 
Pacific Railway Co. v. United States, 356 U.S. 1, 4 (1958), the focus 
of the ``public interest'' inquiry under the Tunney Act is whether the 
proposed final judgment would serve the public interest in free and 
unfettered competition. United States v. American Cyanamid Co., 719 
F.2d 558, 565 (2d Cir. 1983), cert. denied, 465 U.S. 1101 (1984); 
United States v. Waste Management, Inc., 1985-2 Trade Cas. 66,651, at 
63,046 (D.D.C. 1985). In conducting this inquiry, ``the Court is 
nowhere compelled to go to trial or to engage in extended proceedings 
which might have the effect of vitiating the benefits of prompt and 
less costly settlement through the consent decree process.''\12\ 
Rather,
---------------------------------------------------------------------------

    \12\119 Cong. Rec. 24598 (1973). See United States v. Gillette 
Co., 406 F.Supp. 713, 715 (D. Mass. 1975). A ``public interest'' 
determination can be made properly on the basis of the Competitive 
Impact Statement and Response to Comments filed pursuant to the 
APPA. Although the APPA authorizes the use of additional procedures, 
15 U.S.C. Sec. 16(f), those procedures are discretionary. A court 
need not invoke any of them unless it believes that the comments 
have raised significant issues and that further proceedings would 
aid the court in resolving those issues. See H.R. Rep. 93-1463, 93rd 
Cong. 2d Sess. 8-9, reprinted in (1974) U.S. Code Cong. & Ad. News 
6535, 6538.

absent a showing of corrupt failure of the government to discharge 
its duty, the Court, in making the public interest finding, should * 
* * carefully consider the explanations of the government in the 
competitive impact statement and its responses to comments in order 
to determine whether those explanations are reasonable under the 
---------------------------------------------------------------------------
circumstances.

United States v. Mid-America Dairymen, Inc., 1977-1 Trade Cas. 61,508, 
at 71,980 (W.D. Mo. 1977).
    It is also unnecessary for the district court to ``engage in an 
unrestricted evaluation of what relief would best serve the public.'' 
United States v. BNS, Inc., 858 F.2d 456, 462 (9th Cir. 1988) quoting 
United States v. Bechtel Corp., 648 F.2d 660, 666 (9th Cir.), cert. 
denied, 454 U.S. 1083 (1981). Precedent requires that

the balancing of competing social and political interests affected 
by a proposed antitrust consent decree must be left, in the first 
instance, to the discretion of the Attorney General. The court's 
role in protecting the public interest is one of insuring that the 
government has not breached its duty to the public in consenting to 
the decree. The court is required to determine not whether a 
particular decree is the one that will best serve society, but 
whether the settlement is ``within the reaches of the public 
interest.'' More elaborate requirements might undermine the 
effectiveness of antitrust enforcement by consent decree.\13\

    \13\United States v. Bechtel, 648 F.2d at 666 (citations 
omitted); see United States v. BNS, Inc., 858 F.2d at 463; United 
States v. National Broadcasting Co., 449 F. Supp. 1127, 1143 (C.D. 
Cal. 1978); United States v. Gillette Co., 406 F. Supp. at 716. See 
also United States v. American Cyanamid Co., 719 F.2d at 565.
---------------------------------------------------------------------------

    A proposed consent decree is an agreement between the parties which 
is reached after exhaustive negotiations and discussions. Parties do 
not hastily and thoughtlessly stipulate to a decree because, in doing 
so, they

waive their right to litigate the issues involved in the case and 
thus save themselves the time, expense, and inevitable risk of 
litigation. Naturally, the agreement reached normally embodies a 
compromise; in exchange for the saving of cost and the elimination 
of risk, the parties each give up something they might have won had 
they proceeded with the litigation.

United States v. Armour & Co., 402 U.S. 673, 681 (1971).
    The proposed consent decree, therefore, should not be reviewed 
under a standard of whether it is certain to eliminate every 
anticompetitive effect of a particular practice or whether it mandates 
certainty of free competition in the future. Court approval of a final 
judgment requires a standard more flexible and less strict than the 
standard required for a finding of liability. ``[A] proposed decree 
must be approved even if it falls short of the remedy the court would 
impose on its own, as long as it falls within the range of 
acceptability or is `within the reaches of public interest.' (citations 
omitted).''\14\
---------------------------------------------------------------------------

    \14\United States v. American Tel. and Tel Co., 552 F. Supp. 
131, 150 (D.D.C.), aff'd sub nom. Maryland v. United States, 460 
U.S. 1001 (1982) quoting United States v. Gillette Co., supra, 406 
F. Supp. at 716; United States v. Alcan Aluminum, Ltd., 605 F. Supp. 
619, 622 (W.D. Ky 1985).
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VIII

Determinative Documents

    No documents were determinative in the formulation of the proposed 
Final Judgments. Consequently, the United States has not attached any 
such documents to the proposed Final Judgment.
    Respectfully submitted,

  Dated: April 21, 1994.
Anne K. Bingaman,
Assistant Attorney General.

Robert E. Litan,
Deputy Assistant Attorney General.

Mark C. Schechter,
Deputy Director of Operations.

Antitrust Division,
U.S. Department of Justice, Washington, DC 20530.

Richard L. Rosen,
Chief, Communications & Finance Section, U.S. Department of Justice, 
Antitrust Division, Communications and Finance Section, 555 Fourth 
Street, NY., Washington, DC 20001.

Richard Liebeskind,
Assistant Chief.

John J. Sciortino,
Don Allen Resnikoff, Kevin C. Quin, Attorneys.

U.S. Department of Justice,
Antitrust Division, Communications and Finance Section, 555 Fourth 
Street, NW., Washington, DC 20001, (202) 514-5628.

Richard G. Andrews,
United States Attorney, District of Delaware.

Nina A. Pala,
Assistant United States Attorney, Delaware Bar No. 2622, District of 
Delaware, 1201 Market Street, Wilmington, Delaware 19801, (302) 573-
6277.

Certificate of Service

    I hereby certify that a true and correct copy of the foregoing 
Competitive Impact Statement was served upon counsel for defendant 
Electronic Payment Services, Inc. by enclosing same in a postage pre-
paid envelope addressed to:

Stephen Paul Mahinka, Morgan, Lewis & Bockius, 1800 M St., NW., 
Washington, DC 20036
Brett D. Fallon, Smith, Katzenstein & Furlow, 1220 Market Street, 5th 
Floor, Wilmington, Delaware 19801.

and mailed this 20th day of April, 1994.

Kevin C. Quin.

[FR Doc. 94-11571 Filed 5-11-94; 8:45 am]
BILLING CODE 4410-01-M