[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] [[Page Unknown]] [Federal Register: May 12, 1994] ----------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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). --------------------------------------------------------------------------- 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