[Federal Register Volume 59, Number 167 (Tuesday, August 30, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-21236]


[[Page Unknown]]

[Federal Register: August 30, 1994]


-----------------------------------------------------------------------

DEPARTMENT OF JUSTICE
Antritrust Division

 

United States of America v. Electronic Payment Service, Inc., 
Civ. No. 94-208 (D.Del.); Public Comments on Proposed Final Judgment 
and Response of United States

    Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 
16(b)-(h), the United States publishes below the comments received on 
the proposed Final Judgment in United States of America v. Electronic 
Payment Services, Inc., Civ. No. 94-208, filed in the United States 
District Court for the District of Delaware, together with its response 
to the comments.
    Copies of the comments are available for inspection in room 3229 of 
the United States Department of Justice, Washington, DC and the Office 
of the Clerk of the United States Court for the District of Delaware, 
Wilmington,Delaware.
Joseph H. Widmar,
Deputy Assistant Attorney General.

In the United States District Court for the District of Delaware

    United States of America, Plaintiff, v. Electronic Payment 
Services, Inc., Defendant; Filed August 15, 1994; Civ. No. 94-208

Comments Relating to Proposed Final Judgment and Response of United 
States to Comments

    Pursuant to the requirements of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. Sec. 16(b)-(h), the United States hereby files 
comments it has received relating to the proposed Final Judgment in 
this civil antitrust proceeding, and herein responds to those comments.
    This action commenced on April 21, 1994, when the United States 
filed a Complaint alleging that an anticompetitive practice of 
defendant Electronic Payment Services, Inc. (``EPS'') constituted a 
tying arrangement that was per se unlawful under Section 1 of the 
Sherman Act, 15 U.S.C. Sec. 1, and that constituted a means whereby EPS 
unlawfully had 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 Section 2 
of the Sherman Act, 15 U.S.C. Sec. 2. The United States simultaneously 
filed a proposed Final Judgment, a Competitive Impact Statement and a 
Stipulation signed by the parties consenting to entry of the Final 
Judgment.
    The sixty-day waiting period provided for by 15 U.S.C. Sec. 16(b) 
for submission of public comments expired on July 11, 1994. The United 
States received comments from Cash Station, Inc. (``Cash Station''), 
Chemical Banking Corporation (``Chemical Bank''), Citicorp Credit 
Services, Inc. (``Citicorp''), William R. Kennedy, Meridian Bancorp, 
Inc. (``Meridian''), Midwest Payment Systems, Inc. (``MPS''), Money 
Station, Inc. (``Money Station''), and The New York Switch Corporation 
(``NYCE''). The United States also received an anonymous comment. The 
United States responds herein to these comments.

I. Stored Value Cards

    The subject raised most often by the comments was the treatment of 
stored value cards under the proposed Final Judgment. Stored value 
cards are designed to accept a ``deposit'' of funds, which are then 
drawn down by transfer to other parties in transactions. The card 
effectively replaces cash in these transactions. The most common use of 
stored value cards today is in public transit, most notably in the Bay 
Area Rapid Transit system in the San Francisco area and the Washington, 
DC Metro system. Rather than paying separately for each ride, a 
customer purchases a card for a certain amount, that amount is 
``deposited in'' the card, and the cost of each subsequent ride is 
deducted from the value in the card. The passenger may add value to the 
card with additional ``deposits.'' Libraries also commonly sell stored 
valued cards for use in their copying machines.
    The banking industry expects that stored value cards will be used 
in many other types of transactions in the foreseeable future. Pilot 
projects are under way for use of stored value cards with merchants, in 
vending machines, and at laundromats. While the stored value cards in 
use today are often paper with a magnetic stripe, these cards are 
generally expected to be made of more durable material and function 
through an internal integrated circuit, or ``chip,'' and are often 
referred to as ``smart cards.''
    The comments dealing with this subject suggested that EPS could 
unlawfully maintain its monopoly in access to regional ATM networks, or 
extend its geographic scope, through regulations on the stored value 
feature of hybrid ATM/stored value cards issued by members of its ATM 
network.These commenters suggested that the proposed Final Judgment 
could contain various restrictions on the ability of EPS to issue such 
regulations.\1\
---------------------------------------------------------------------------

    \1\Citicorp suggested that the defendant could block entry of 
competing smart card networks by imposing technical restrictions 
(presumably covering communications format, hardware or software) on 
MAC members that create incompatibilities between their ATMs and 
non-MAC smart cards. Citicorp notes that EPS currently uses a smart 
card technology different from some competing smart cards.
    A similar situation could have, but did not, arise with respect 
to ATM cards when they were introduced in the 1970s. There is no 
inherent reason to believe that such a situation will arise with 
respect to smart cards. While Citicorp's observations may be 
correct, detailed regulation of smart card operations and technology 
is not necessary or possible at the present time. As discussed 
below, if anticompetitive practices develop as smart cards are 
introduced, action can be taken at the appropriate time.
---------------------------------------------------------------------------

    Section IV.H of the proposed Final Judgment prohibits EPS from 
restricting the branding of ATMs with the marks of networks in addition 
to MAC, and likewise enjoins EPS from restricting the branding of ATM 
cards with the marks of multiple networks by banks in certain states. A 
later clause in Section IV.H provides that, ``notwithstanding the 
preceding, Defendant * * * may restrict the branding of access cards 
that contain an integrated circuit computer chip with a stored value 
function.''
    The effect of this clause is to exclude the branding of the stored 
value function from the injunction against restrictions on multiple 
branding of cards. EPS may, within the limits of antitrust and other 
applicable laws, restrict the branding of ``stand-alone'' stored value 
cards (cards having no ATM functions) and the stored value function of 
``hybrid'' ATM/stored value cards. EPS may not, however, restrict the 
branding of stand-alone ATM cards or the ATM functions of hybrid cards, 
nor may EPS defeat the injunction against restrictions on dual branding 
by converting ATM functions to integrated circuit technology.\2\ The 
clause is necessary since in its absence paragraph IV.H could be 
interpreted to enjoin EPS from restricting the branding of both the 
stored value function and the ATM functions of hybrid cards.
---------------------------------------------------------------------------

    \2\For purposes of the proposed Final Judgment, it is irrelevant 
whether the ATM functions in a card are carried out by a magnetic 
stripe or an integrated circuit. The obligations of EPS are not 
affected by the method of ATM access. The clause permitting 
restrictions on the branding of stored value functions is limited to 
chip-based stored value functions because that was the limit of the 
exception EPS sought.
---------------------------------------------------------------------------

    Any other construction would lead to results not intended by the 
proposed Final Judgment. As discussed in the Competitive Impact 
Statement, the goal of Paragraph IV.H of the proposed Final Judgment is 
to ensure that MAC member depository institutions can participate in 
non-MAC ATM networks in practice as well as in theory. To that end, EPS 
must permit a member's ATM cards to function in the other networks in 
which that member participates; EPS cannot block these cards from 
functioning in multiple networks. In general, cardholders are aware of 
such multiple network functionality primarily because their ATM cards 
carry the brands of the relevant networks. If the clause were 
interpreted to allow EPS to restrict the branding of both the stored 
value and the ATM features of hybrid ATM/stored value cards, the result 
would be that these hybrid cards would function as ATM cards in another 
network (as required by the proposed Final Judgment) but would carry no 
brand for that network. Cardholders would thus be unaware of their 
ability to access this network, and would not use the card for that 
purpose. This result--cards with ``hidden'' functionalty--was not 
intended by either party to the proposed Final Judgment.
    The United States is not aware of any current multiple branding 
restrictions on stand-alone stored value cards or the stored value 
function of hybrid ATM/stored value cards in the MAC network. Nothing 
in the proposed Final Judgment, or any other document filed by the 
United States in this action, should be interpreted as evidencing a 
conclusion by the United States that such restrictions would or would 
not be a violation of the antitrust laws. Contrary to the observation 
in a comment filed by Chemical Bank, the proposed Final Judgment does 
not give EPS the ``right'' to issue such regulations; rather, EPS 
continues to be bound by the antitrust laws and any other applicable 
laws. If such regulations are issued and prove to be an antitrust 
violation, they can and would be challenged at the appropriate time.

II. POS Issues

    Comments filed by MPS, Money Station and an anonymous source argued 
that the proposed Final Judgment should apply to access to point-of-
sale (``POS'') network services as well as access to regional ATM 
network services.\3\ As previously noted, the investigation conducted 
by the United States concluded that EPS had unlawfully maintained a 
monopoly in access to regional ATM network services in certain 
geographic areas. It did not determine whether EPS had market power in 
POS services, or whether the conduct of EPS in relation to its POS 
network business constituted an antitrust violation.
---------------------------------------------------------------------------

    \3\POS terminals are generally located in the establishments of 
merchants. They accept an ATM card and, using the ATM network or a 
parallel POS-only network, access the cardholder's account to 
transfer funds to the merchant's account.
---------------------------------------------------------------------------

    As explained more fully in the Complaint and Competitive Impact 
Statement, MAC has maintained its monopoly in access to regional ATM 
network services in part by preventing the use of third party 
processors by its member depository institutions. It is the 
understanding of the United States that EPS does not forbid the use of 
third party processors in its POS network.\41\ Moreover, although the 
comments noted that EPS was a significant supplier of POS network 
services and suggested that it might exercise its strength in this area 
to maintain its monopoly in access to ATM network services, none of the 
comments indicated that EPS was taking any action of this type.\5\ 
Nevertheless, the proposed Final Judgment does not, as argued by Money 
Station, leave EPS ``free'' to place restrictions on the use of POS 
services by MAC members. Rather, EPS is bound by the antitrust laws and 
other applicable laws. If the conduct of EPS in the provision of POS 
network services constitutes an antitrust violation, it can and would 
be challenged at the appropriate time.
---------------------------------------------------------------------------

    \4\MPS compared the fees charged by EPS to and for the use of 
third party processors in its POS network with the cap set by the 
proposed Final Judgment on fees to and for the use of third party 
processors in its ATM network. While the comment noted that fees 
were higher in the POS network, this in and of itself does not 
establish that third party processors are unable to operate in the 
POS network, nor does it establish that EPS has monopoly power in 
access to POS network services.
    \5\Money Station noted that EPS could conceivably forbid MAC 
members to join other POS networks, or that it could forbid the use 
of third party POS processors by its members. While such conduct 
could constitute an antitrust violation, there is no allegation that 
EPS has taken such action. The United States is not prepared to 
speculate as to whether EPS will issue regulations on the use of POS 
network or processing services by its members, nor upon the content 
of any such regulations. Such regulations can be challenged if and 
when they are instituted.
---------------------------------------------------------------------------

III. Voidability of Contracts

    Cash Station expressed concern that the proposed Final Judgment 
does not make clear that ATM processing and authorization processing 
contracts between EPS and its members are voidable by the members.
    Paragraph IV.A of the proposed Final Judgment states in relevant 
part:

    Defendent shall not maintain or enforce any * * * contract * * * 
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.

This provision makes void any contracts containing such clauses. 
Paragraph IV.I of the proposed Final Judgment permits EPS to enter into 
new contracts with any customers, including those whose contracts have 
become void under the terms of Paragraph IV.A, provided that it 
supplies a copy of the Final Judgment to those customers and the new 
contracts conform to the terms of the Final Judgment.
    Cash Station also expressed concern that unless EPS were required 
to explicitly notify those customers whose contracts were voided by the 
proposed Final Judgment it would continue to reap the benefits of these 
contracts until they expired. Notification is provided for in the 
proposed Final Judgment, which requires EPS to provide a copy of the 
Final Judgment to all of its customers. In addition, third party 
processors and competing regional ATM networks will be highly likely to 
bring this fact to the attention of potential customers.

IV. Gateways

    MPS suggested that the proposed Final Judgment should require EPS 
to establish ``gateways'' with other regional ATM networks.\6\ The 
United States considered this issue in the course of its investigation 
and concluded that ensuring that MAC members would be permitted to use 
third party processors would be a simpler and more efficient type of 
injunctive relief to remove the barriers to entry of competing 
networks, since access to other networks will be offered by these third 
party processors.
---------------------------------------------------------------------------

    \6\A gateway between two regional ATM networks is essentially a 
short-cut to avoid the use of a national ATM network and its 
relatively high fees. Often today a cardholder of one network can 
conduct transactions on the ATMs of another network. In most cases 
such a transaction would be routed to the cardholder's depository 
institution over a national ATM network linking the two regional ATM 
networks. With a gateway, however the transaction is routed directly 
from the network of the ATM deployer to the network of the card 
issuer.
---------------------------------------------------------------------------

V. Non-bank ATM Deployers

    An anonymous comment stated that the proposed Final Judgment did 
not clearly apply to ATM deployers other than depository institutions. 
Paragraph II.H clearly states that ``depository institution'' for 
purposes of the proposed Final Judgment includes all MAC members who 
deploy ATMs. The proposed Final Judgment therefore applies to all MAC 
members, whether or not depository institutions.

VI. Technical, Financial and Operating Rules

    Paragraph IV.E of the proposed Final Judgment requires EPS to 
provide qualified third party processors access to the MAC network. 
Because a ``qualified'' third party processor is defined in part as one 
which meets the defendant's existing technical, financial and operating 
criteria for intercept processors and third party processors, an 
anonymous comment argued that the United States should undertake a 
comprehensive review of the existing criteria and each change to the 
criteria.
    The terms of the proposed Final Judgment render such a detailed 
review unnecessary. The paragraph in question makes clear that these 
criteria are the same for both third party processors and intercept 
processors.\7\ As discussed in the Competitive Impact Statement, the 
United States has concluded that EPS has a strong incentive to deal 
fairly with its intercept processors, and requiring equal treatment of 
third party processors and intercept processors should therefore assure 
that third party processors are also dealt with fairly.
---------------------------------------------------------------------------

    \7\In fact, EPS has represented that it currently has no 
financial criteria relevant to third party processors.
---------------------------------------------------------------------------

    While a subsequent clause allows EPS to establish additional 
technical criteria for third party processors, the clause states that 
additional technical criteria may only concern the transaction 
information to be transmitted and the communication and data format. 
Moreover, the additional criteria may not discriminate between third 
party processors and intercept processors.
    The comment lists several possible methods by which third party 
processors could be treated unfairly by EPS, such as delays in the 
payment of moneys owed, unnecessary mandatory training sessions, and 
late notification of network technical changes. Because the proposed 
Final Judgment requires that third party processors and intercept 
processors have equal access to the network, any such discriminatory 
treatment would violate the proposed Final Judgment. Additional 
restrictions are unnecessary.

VII. Pricing Structure

    An anonymous comment discussed the EPS pricing structure for third 
party processors and suggested several changes to that structure for 
incorporation into the Final Judgment. One section of this comment 
alleged that EPS rules require third party processors seeking access to 
the MAC network to be ``sponsored'' by a MAC member depository 
institution, and that the third party processor is often charged a fee 
by the MAC member for this sponsorship. Such a sponsorship requirement 
would violate paragraph IV.E of the proposed Final Judgment, which 
requires that third party processors be offered access to the MAC 
network equal in type and quality to that offered to intercept 
processors.
    The comment also stated that the charge paid by third party 
processors in most ATM networks consists of a combination of a charge 
from the network and a charge from the card-issuing bank, and that this 
latter charge is paid by the network to the card-issuing bank.\8\ The 
comment alleged that this ``bundling'' of fees is anticompetitive, 
apparently arguing that this conduct constitutes a tying violation. 
However, a traditional element of tying violations is that the products 
are actually separate; in other words, that they can be or have been 
bought or sold separately. The comment itself suggests that all ATM 
networks currently charge in this manner. Moreover, to the knowledge of 
the United States, EPS is not currently engaged in such conduct since, 
as discussed in the Complaint and Competitive Impact Statement, EPS 
essentially has no third party processors in its network. If EPS 
chooses to institute such a pricing policy it can then be determined if 
the policy violates the proposed Final Judgment or antitrust laws.
---------------------------------------------------------------------------

    \8\The United States is not at all certain that this is the 
case. It is the understanding of the United States that in most ATM 
networks a transaction that reaches the network switch through the 
third party processor of the bank acquiring the transaction results 
only in a charge for use of the network. The only other charge 
associated with the transaction is an ``exchange revenue'' charge 
which is paid by the card-issuing bank to the transaction-acquiring 
bank. In essence, this is a charge for use of the acquiring bank's 
ATM terminal by the cardholder of the card-issuing bank.
---------------------------------------------------------------------------

    Finally, the comment argues that the proposed Final Judgment should 
order EPS to distribute MAC price lists as a method of ``policing'' the 
non-discrimination clause. However, there is no reason to believe 
either that EPS will violate the proposed Final Judgment by offering 
discriminatory pricing or that it would be able to keep such a blatant 
violation confidential. In addition, the proposed Final Judgment 
permits the United States to issue inquiries to EPS which would easily 
determine its pricing arrangements. It is therefore not necessary to 
order publication of price lists.

VIII. Subswitching

    Money Station argued that by permitting EPS to charge for 
subswitching of transactions, the proposed Final Judgment interferes 
with the ability of third party processors to access the network. 
``Subswitching'' refers to the switching of transactions between 
members of the same regional network without accessing that network, 
and therefore without paying its switch fees. Generally this is done by 
passing the transaction through a third party processor that provides 
ATM processing for both members. Many regional ATM networks, although 
not all, have rules against subswitching. These networks argue that 
cardholders, who make the ultimate decision about which ATM to access, 
choose a particular ATM based upon their expectation that the 
transaction will be routed over a common regional ATM network, known to 
the cardholder by the brand logo on the ATM and the card. Permitting 
subswitching in this view merely allows third party processors to 
``free ride'' on the advertising efforts of the common network.
    Paragraph IV.G.2 of the proposed Final Judgment permits EPS to 
charge a royalty on subswitching equal to the price EPS would charge 
for a switched transaction. As Money Station notes, this would likely 
discourage subswitching since the third party processor would also 
charge a fee for its services. Nevertheless, this will not discourage 
entry by third party processors. As described in the Complaint, third 
party processors have not been successful in entering MAC's geographic 
region because MAC members have been unable to purchase their ATM 
processing services. The proposed Final Judgment ensures that MAC 
members will be able to use third party processors. Inability to offer 
subswitching does not appear to be a substantial barrier to entry. 
Moreover, third party processors wishing to offer the ability to switch 
transactions can simply become a network by ``branding'' their 
services; in other words, putting their brand logos on cards and ATMs. 
The third party processor would then become a competing regional ATM 
network to which EPS, according to paragraph IV.H of the proposed Final 
Judgment, may not restrict access.

IX. Definition of ``Restrict''

    Money Station suggests that the term ``restrict'' as used in 
paragraph IV.H and certain other clauses of the proposed Final Judgment 
is not sufficiently defined. It was not necessary to define this term 
since the phrase used was ``restrict in any manner.'' This broad 
prohibition on restrictions is all that is necessary; if any 
restriction is imposed, it will violate the proposed Final Judgment.

X. Conclusion

    Pursuant to 15 U.S.C. Sec. 16(e), the proposed Final Judgment 
cannot be entered unless the Court determines that it is in the public 
interest. The focus of this determination is whether the relief 
provided by the proposed Final Judgment is adequate to remedy the 
antitrust violations alleged in the Complaint. United States v. Bechtel 
Corp., 1979-1 Trade Cas. (CCH) 62,430 (N.D. Cal. 1979), aff'd. 648 
F.2d 660, 665 (9th Cir. 1981), cert. denied 454 U.S. 1083 (1982). After 
careful consideration of the comments, the United States continues to 
believe that the proposed Final Judgment is adequate to remedy the 
antitrust violations alleged in the Complaint and therefore that entry 
of the proposed Final Judgment is in the public interest.
    After the comments and the response of the United States have been 
published in the Federal Register, pursuant to 15 U.S.C. Sec. 16(d), 
the United States will move the Court for entry of the proposed Final 
Judgment.

    Dated: August 15, 1994.
      Respectfully submitted,
Kevin C. Quin,
Attorney, Communications & Finance Section, Antitrust Division, 555 
Fourth Street, NW., Washington, DC 20001, (202) 514-5660.
Gregory M. Sleet,
United States Attorney.
    By Nina A. Pala/by Kevin Quin
Nina A. Pala,
Assistant United States Attorney, Delaware Bar No. 2622, District of 
Delaware, 1201 Market Street, Wilmington, Delaware 19801, (302) 573-
6277.
July 6, 1994.
Mr. Richard Liebeskind,
Assistant Chief, Communications and Finance Section, Antitrust 
Division, U.S. Department of Justice, 555 Fourth Street, N.W., Room 
8104, Washington, D.C. 20001.

Re: Comments to the Proposed Final Judgment in United States of 
America v. Electronic Payment Services, Inc., Civ. No. 94-208.

    Dear Mr. Liebeskind, Enclosed are comments on the proposed Final 
Judgment in the above mentioned action. These comments are submitted 
to you pursuant to the provisions of the Antitrust Procedures and 
Penalties Act providing for a comment period prior to the effective 
date of the proposed Final Judgment.
    To be sure, we appreciate your time and efforts in this matter 
and look forward to open competition in the banking services 
industry. However, we do have concerns with the proposed Final 
Judgment which are set forth in the enclosure.
    Please feel free to call me with any questions you may have. I 
can be reached at (513) 579-5447.
    Thank you,
      Sincerely,
MIDWEST PAYMENT SYSTEMS, INC.
Henry W. Hobson, III,
Senior Vice President.
Enclosures
c: Robert F. Uhrig

Comments on The Proposed Final Judgment

US v. EPS

    When a shared network obtains market dominance, it can preclude 
use of it by other parties (financial institutions or third party 
processors) by explicit exclusions or by more insidious means, 
generally pricing. These issues are clearly recognized by the 
proposed Final Judgment, and language in section IV establishes what 
the ``prohibited conduct'' would be on the part of MAC. The judgment 
goes on to say that MAC ``shall not restrict in any manner, directly 
or indirectly, the ability. . .to obtain ATM processing or 
authorization for access to the MAC or any successor branded ATM 
network controlled by defendant from any qualified third party 
processor.'' Generally, equal access shall be provided to qualified 
third party processors on equal terms as those extended to intercept 
processors, including aggregation of transactions. Reciprocity of 
processing, including pricing and terms, is also contemplated.
    Defendant is also ordered to offer volume discounts to all, on 
substantially equal terms, and the judgment also permits MAC to 
offer transaction switching at nondiscriminatory royalties that 
shall not be greater than the price for switched transactions. This 
last stipulation may need a bit of clarification for the Final 
Judgment to have its intended effect, however, and that is the 
substance of this comment.
    Banks and other financial institutions have ``joined forces'' in 
many, widely different combinations to offer electronic banking 
services to their customers since the advent of ATM's and other 
electronic terminals. Generally speaking, these combinations are 
formed for (1) marketing purposes, (2) particular geographic areas, 
(3) brand identification that differentiates services available to 
particular sets of customers, and (4) cost efficiencies that result 
from larger transaction bases (economies of scale). Whatever the 
reason, there now exists a diverse tapestry of electronic banking 
associations across the United States, but in some areas, a 
monopolistic enterprise threatens the existence of many smaller 
networks. Such is the case with MAC and its ATM network.
    Open access is available, but only from a technological point of 
view. Financial institutions and third party processors are 
essentially forced to join the dominant network to provide the 
greatest access possible to retail customers. There would be no 
problem if the dominant network would change only for transactions 
(without surcharge or royalty) based on volume of transactions 
presented. Then the user of the subordinate network would be paying 
for the marketing benefits of its smaller network and only for the 
use of the ``electronic highway'' provided by the dominant network. 
In fact, the brand identity of the dominant network serves no 
purpose to an otherwise ``unbranded'' user. Moreover, no one would 
argue that the choice to join MAC should be made by weighing the 
advantages of its brand (with all the consequent marketing and 
service differentials) against an alternative brand, but MAC's 
current pricing structure places a punitive burden on third party 
processors and financial institutions and forces membership in the 
network, requiring MAC identification, thus hastening the demise of 
subordinate networks and eliminating choice between different 
providers of service.
    Just recently the Quest Network of Kentucky sent a letter to its 
participants indicating that its viability had been re-assessed, 
with the outcome that the Quest brand would be discontinued in favor 
of MAC by June 1, 1995 (letter attached). The only reason for this 
change was the layering of pricing to participants in the Quest 
Network caused by the brand identity of MAC on its members who were 
also members of the Quest Network.
    A simple solution to this issue would be the ability of 
subordinate networks to use the dominant network for transaction 
switching, paying a competitive and nondiscriminatory price for that 
use, but without the requirement of brand identification (and 
subsequent terms and pricing) of membership in the dominant network. 
Reciprocity should also be a requirement, such that if the dominant 
network desired the ability to use the subordinate network's 
transaction switching service, it, too, would have to provide full, 
complete and nondiscriminatory access to its network without 
mandating membership and brand identity by the dominant network 
members. In essence, ``open access'' should be the rule without 
``branding'' each network with the other's identity in an area where 
there is clear dominance by one network over others. This is the 
case in Illinois where four (4) networks act cooperatively to permit 
universal access to any cardholder in that state without requiring 
any one network member (or third party processor) to join any other 
network. Pricing is based solely upon the number of transactions 
processed.
    The concept of ``ubiquity and convenience'' can only be 
accomplished by a truly open environment where individual 
institutions, processors or networks can have access to the dominant 
electronic banking network, which in this case is MAC, and where MAC 
members can enjoy the same reciprocity at the subordinate network 
terminals.
    It is not clear what effect the proposed Final Judgment will 
have on point of sale (POS) services. Although MAC may or may not be 
practicing the exact same ``anti-competitive'' conduct in the POS 
area as in the ATM area, certain barriers do exist which discourage 
competition. For example, although MAC seems to allow member 
financial institutions to use third party processors to provide POS 
services to such financial institution's sponsored merchants, the 
costs of such an option are prohibitive. MAC charges a $25,000 
``Processor Initialization Fee'' to such a third party processor 
(MAC Point of Sale Schedule of Fees attached). The MAC Point of Sale 
Schedule of Fees states that this fee is for test time and 
certification, but the $25,000 only includes 20 hours of test time 
and there is a charge of $250 per hour for test time which exceeds 
the 20 hours. This set-up or establishment fee is plainly excessive 
in relation to the $100 per hour, $1,000 maximum third party 
processor set-up fee set forth in the proposed Final Judgment. In 
addition, MAC charges third party POS processors $1,000 per month 
for the first communications port, $2,000 per month for each 
additional communications port and a $300 per month ``Processor 
Residency Fee''. Given the importance and dramatic rise in POS 
transactions over the years, failure to explicitly include POS 
antitrust stipulations in the proposed Final Judgment could have a 
devastating effect on competition in the POS area.
    Finally, there is a curious exclusion of ``access cards that 
contain an integrated circuit computer chip with a stored value 
function'' from branding restrictions in Section IV(H). If these 
cards should be issued by a MAC member, and their use might include 
the necessity to utilize transaction switching services of MAC from 
a terminal other than a MAC terminal, should they not also be 
included in the philosophy that says there can be no brand 
restriction by MAC? It is recognized that use of these unique types 
of cards may involve ``off-line'' transactions throughout some 
period, but the settlement and switching of settlement transactions 
may necessitate the same unrestricted access to the network that 
magnetically striped cards would employ in an ``on-line'' mode. As 
an example, if a cardholder in an ``electronic benefits'' (EBT) 
processing area that utilizes ``smart card'' technology is able to 
withdraw a certain amount of cash from ATM's as part of the benefit 
distribution process, and that cardholder uses an ATM belonging to a 
network or processed by a third party processor other than MAC, the 
network or processor should be able to switch settlement 
transactions through MAC (paying the standard switching fee) without 
paying an excessive royalty or finding it necessary to become a 
member of MAC in order to complete the transaction.

MEMORANDUM

Date: June 22, 1994
To: All Quest Network Participants
From: Mike McEvoy, President, Transaction Services Company
Subject: Future Direction of the Quest Network

    On May 10, 1993, the Quest Network sent a memorandum to your 
organization that outlined our commitment to continue providing 
Quest-branded services to financial institutions throughout this 
market area. Since that communication a year ago, several major 
announcements and changes have occurred which has resulted in a re-
assessment of the ongoing viability of the Quest Network and the 
services offered under the Quest brand.
    Electronic Payment Services, Inc. (EPS) is a Delaware 
corporation currently owned by four bank holding companies: Banc One 
Corporation, Columbus, Ohio; CoreStates Financial Corporation, 
Philadelphia, Pennsylvania; KeyCorp, Albany, New York (successor to 
Society Corporation, Cleveland, Ohio); and PNC Bank Corp., 
Pittsburgh, Pennsylvania. These four bank holding companies have 
consolidated their various ATM/POS networks (MAC, Owl, Jubilee, Tri-
Net and Green Machine) into EPS under the MAC brand name. EPS has 
also announced plans to add two additional equity owners: Mellon 
Bank Corporation and National City Corporation. Locally and 
regionally, the affiliates of PNC Bank, Bank One, and National City 
Bank will actively participate in the MAC network and will be 
converting their cardholder base and ATM terminals to the MAC brand. 
Liberty National Bank, which is being acquired by Banc One 
Corporation, has also joined and will likewise actively participate 
in the MAC network. Liberty will be converting their cardholder base 
and ATM terminals to the MAC brand, and will be re-marketing MAC 
access to other financial institutions throughout the region.
    These developments will cause a majority of the ATM and POS 
transactions currently processed by the Quest Network to be 
converted to the MAC brand. It is difficult to develop a reasonable 
long-term business case for the continuation of the Quest Network 
and its Quest brand when a significant portion of the transaction 
processing business will be directed to the MAC network.
    The owners of the Quest Network believe that the time to begin 
an orderly transition from the Quest brand is at hand. The Quest 
Network will offer transition assistance to each of its 
participants, if requested, and has begun to develop a plan to 
assist those participants wishing to convert to the MAC network. The 
Quest Network will also assist participants that wish to convert to 
another network, if requested. This transition period will begin in 
July 1994 and will conclude by June 1995. The Quest Network, 
therefore, does not expect to operate beyond June 1, 1995.
    We appreciate your past loyalty, support and participation in 
the Quest Network and pledge to work with you and your processors to 
effect a timely transition with minimal disruption to your financial 
institution and your customers. If you have questions, please feel 
free to contact any of the owners of the Quest Network regarding any 
aspect of this announcement.
Wallace A. Fudold,
Executive Vice President, Bank of Louisville.
Roy A. Eon,
Vice President, Bank One, Lexington N.A.
W. LeGrande Rives,
Executive Vice President, Liberty National Bank.
Leslie H. London,
Senior Vice President, National City Bank, Kentucky.
Edward F. Johnson,
First Senior Vice President, Owensboro National Bank.
Michael D. Moll,
Vice President, PNC Bank, Kentucky.
John T. Perkins,
Executive Vice President, Trans Financial Bank, N.A., Chairman, Quest 
Network.
Michael E. McEvoy,
President, Transaction Services Company, Quest Network.


             Exhibit A.--MAC Point of Sale Schedule of Fees             
                             [July 1, 1992]                             
                                                                        
                                                                        
1. Processor Initialization Fee (for    $25,000.                        
 either direct access or for intercept                                  
 processor on behalf of a financial                                     
 institution, includes 20 hours of                                      
 test time for certification).                                          
2. processor Initialization Fee for     $2,000.                         
 each additional Processor added                                        
 through your Gateway link.                                             
3. Excess Test Time Fee (for each hour  At current rates (rate as of    
 of test time in excess of 20 hours).    July 1, 1992) is $250 per hour.
4. Additional Communications Ports @    $2,000 per port.                
 9600 BPS.                                                              
5. Monthly Processor Connect Fee:                                       
    Port Fee (per port @ 9600 BPS)....  $1,000 per month.               
    Processor Residency Fee (maximum    $300 per processor.             
     $2,000).                                                           
6. Transaction Fee: For each            $.045 per transaction.          
 transaction received by the MAC                                        
 switch from you including incompleted                                  
 and denied transactions.                                               
7. Communications Fees: These shall be                                  
 forwarded on a pass through basis                                      
 monthly and include line charges,                                      
 maintenance and equipment including                                    
 maintenance of such equipment.                                         

July 7, 1994.
Mr. Richard Rosen,
Chief, Communications and Finance Section, U.S. Department of 
Justice, Antitrust Division, 555 4th Street, NW., room 8104, 
Washington, DC 20001.

Re: United States of America v. Electronic Payment Service, Inc., 
U.S. District Court for the District of Delaware, Civ. No. 94-208

    In response to the invitation extended on page 24712 of the May 
12, 1994 edition of the Federal Register (59 FR 24712), Cash 
Station, Inc. comments on the proposed Final Judgment filed in the 
proceeding named above.
    Cash Station, Inc. operates a regional automated teller machine 
(``ATM'') and point-of-sale terminal (``POS'') network, and is 
headquartered in Chicago, Illinois.
    Our comments are as follows:

1. Paragraph IV.H--Branding Restrictions

    Paragraph IV.H of the proposed Final Judgment requires EPS to 
permit MAC members to display multiple network marks on ATMs and ATM 
cards, stating that ``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 * * * [and] shall not prohibit any institution ATM 
card issuer located in [specified states] * * * from issuing cards 
that display multiple ATM logos.'' Despite that restriction, EPS is 
permitted to ``restrict the branding of access cards that contain an 
integrated circuit computer chip with a stored value function.''
    Assuming that it is appropriate to limit EPS's ability to 
restrict co-branding in connection with the ``MAC'' logo, the 
exclusion of stored value cards from this limitation creates a 
significant loophole for EPS.
    First, as drafted in the proposed Final Judgment, the stored 
value card exception appears to allow EPS to retain its prohibition 
on co-branding simply by causing all of its debit cards to be 
reissued on card stock that has, in addition to the magnetic stripe 
found on the cards currently issued, and integrated circuit computer 
chip with a stored value function. We expect that many of EPS's 
smart cards will be multipurpose cards that bear both the 
traditional magnetic strip technology found on today's on-line debit 
cards and an integrated computer chip with a stored value function. 
Assuming that it is appropriate to provide relief on the branding 
restrictions in the case of the stored value cards (see below), 
Paragraph IV.H. should specify that such relief applies only to 
cards that function solely through use of the computer chip and do 
not also function as a traditional debit card using existing 
magnetic strip technology. Otherwise, the benefits sought to be 
obtained under Paragraph IV.H. may be illusory.
    Second, again assuming the EPS is entitled to some relief with 
respect to its stored value card, we question whether EPS should be 
allowed to further the market power enjoyed by the ``MAC'' ATM brand 
by suing that brand to identify the store value card technology. In 
other words, if EPS is allowed to avoid the effects of the Final 
Judgment in connection with an ancillary product, should it not also 
be precluded from promoting the ancillary product with the brand 
that is central to the Final Judgment?
    Finally, it is not clear why any protection is appropriate in 
the case of EPS's stored value card product. It is our understanding 
that EPS did not invent the chip card technology but is simply 
applying existing technology.

2. Paragraph IV.I.--Voidability of Existing Processing Contracts.

    The proposed Final Judgment does not clearly indicate that the 
contracts entered into illegally by EPS for ATM processing and 
authorization processing are voidable at any time by the financial 
institutions. Paragraph IV.A of the proposed Final Judgment states 
that EPS ``shall not maintain or enforce any * * * contract, 
agreement or arrangement'' that furthers the tying practices that 
are the subject of the proceeding, and Paragraph IV.I. of the 
proposed Final Judgment allows EPS to sign up new customers by 
delivering a copy of the Final Judgment (apparently on a prospective 
basis only), but nowhere is it stated affirmatively that each of 
EPS's existing ATM and authorization processing customers may cancel 
its processing agreements with EPS at any time without penalty or 
that EPS must notify its customers of their rights to terminate 
these agreements. If it is not made clear that the existing 
contracts are voidable, EPS may enjoy the benefits of the tying 
arrangements through the expiration of these contracts, which may 
not occur for several years.
      Very truly yours,

Cash Station, Inc.

    By:
James H. Hayes,
Senior Vice President and General Counsel.

July 11, 1994.
By Hand

Richard Rosen, Esq.,
Chief, Communications and Finance Section, Antitrust Division, U.S. 
Department of Justice, 555 4th Street, N.W., Room 8104, Washington, 
D.C. 20001

Re: United States of America v. Electronic Payments Services, Inc., 
Civ. No. 94-208

    Dear Rich: Enclosed are two copies of Citicorp's comments 
concerning the proposed consent decree in the above-captioned 
matter. They are submitted pursuant to Section 2(b) of the Antitrust 
Procedures and Penalties Act, 15 U.S.C. Sec. 16(b), and in 
accordance with the notice published in the Federal Register on May 
12, 1994. The comments address Section IV, Paragraph H of the 
proposed consent decree.
    Please let me know if you have any questions concerning these 
comments.

      Sincerely,
A. Douglas Melamed
Enclosures

Comments of Citicorp Credit Services, Inc., Concerning the Proposed 
Consent Decree in United States v. Electronic Payments Services, Inc.

    Pursuant to Section 2(b) of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. Sec. 16(b), Citicorp Credit Services, Inc. 
(``Citicorp'') submits these comments concerning the proposed 
consent decree in United States v. Electronic Payments Services, 
Inc., which was filed in the United States District Court for the 
District of Delaware on April 21, 1994, and published in the Federal 
Register on May 12, 1994. Citicorp is not a member of defendant 
Electronic Payment Services' (``EPS'') ATM network, Money Access 
Service (``MAC''). Citicorp is, however, involved in all aspects of 
electronic fund payments, including credit cards, ATM cards, and, 
more recently, access cards containing an integrated circuit 
computer chip with a stored value function, or ``smart cards''.
    The Complaint on which the consent decree is based alleges that 
MAC is the largest ATM network in the United States by transaction 
volume; that EPS has entered into agreements with a multitude of 
banks in Pennsylvania, New Jersey, Delaware, and other states; that 
more than ninety percent of all ATMs in Pennsylvania, New Jersey, 
and Delaware are connected to MAC; that MAC is the ``dominant'' ATM 
network in those states; and that ``nearly all banks'' regard MAC 
as, in effect, an essential facility for entry into the ATM 
business. ( 14, 19, 20.) The Complaint further alleges that EPS 
has used its ``monopoly power'' to exclude competitors from the ATM 
business in MAC's areas of dominance. (25.)
    The proposed consent decree is intended to put an end to EPS' 
anticompetitive practices and thereby to increase ATM network 
competition. Citicorp is concerned, however, that the proposed 
consent decree could be understood--or, more likely, misunderstood--
to give EPS license to engage in what may be anticompetitive conduct 
with respect to the smart card business.
    The source of this concern is Paragraph H of Section IV of the 
proposed consent decree. Among other things, that Paragraph 
prohibits EPS from restricting MAC-member banks from issuing ATM 
cards that display multiple ATM network logos. The Paragraph goes on 
to state, however, that EPS ``may restrict'' multiple branding of 
smart cards. The Competitive Impact Statement asserts that 
permitting EPS to restrict multiple branding of smart cards will not 
lessen the pro-competitive impact of the consent decree (page 16, 
n.10).
    Citicorp understands these statements to mean only that 
restrictions on multiple branding of smart cards are not prohibited 
by the consent decree. But the language is not clear and could be 
read to manifest a conclusion by the Department of Justice that 
restrictions on multiple branding, and perhaps other EPS 
restrictions on smart cards, are not anticompetitive. No such 
conclusion is warranted on this record, and the Department should 
make clear that it has reached no such conclusion.
    It is too early to know whether future restrictions on smart 
card branding, or other restrictions not barred by the proposed 
consent decree, would be procompetitive or anticompetitive. It is 
not difficult to imagine, however, how EPS could engage in 
anticompetitive practices that could injure the fledgling smart card 
business if EPS' dominant position in the ATM network market 
persists.
    For example, if successful development of non-MAC smart card 
networks required participation of many or all of the thousands of 
MAC-member banks, EPS could deal a crippling blow to competing smart 
card networks by prohibiting MAC-member banks from participating in 
non-MAC smart card networks. Similarly, if access to the MAC ATM 
network were essential to the success of competing smart cards, EPS 
could doom competitors by prohibiting such access.
    EPS could achieve the same objectives through less direct means. 
EPS could impose operating rules or technical restrictions on third-
party processors that as a practical matter make it impossible for 
MAC-member banks' ATM machines to be accessed by non-MAC smart cards 
or cards that utilize a technology different from that used for MAC 
smart cards.\1\ Such restrictions would be similar to the ATM 
network processing restrictions that are prohibited by the proposed 
consent decree.
---------------------------------------------------------------------------

    \1\Currently, EPS utilizes the smart card technology offered by 
Gem Plus. Competitors including Microcard, Schlumberger, IBM, and 
AT&T offer different technology.
---------------------------------------------------------------------------

    Restrictions on multiple smart card branding could also make it 
economically infeasible for banks to participate in more than one 
smart card network. MAC-member banks that issue MAC smart cards 
would have to issue additional cards to give their customers access 
to non-MAC machines and networks. The resulting additional costs 
could discourage MAC-member banks from participating in other smart 
card networks and thereby impede the development of competing 
networks.
    Depending on the circumstances, any of these kinds of 
restrictions could reduce competition and prevent the development of 
alternative, and perhaps superior, smart card technologies. The 
risk, in short, is that EPS could use its existing dominant power in 
ATM networks and ATM processing, and the MAC-member banks' control 
of essential facilities, to prevent the establishment of competing 
smart card networks and thereby leverage its ATM monopoly into 
market power in the smart card business. If so, EPS' restrictions 
could injure both MAC-member banks (and their customers) and, 
perhaps more important, entities (and their potential customers) 
that would prefer not to join MAC but rather to compete against it.
    Accordingly, Citicorp urges the Department of Justice to make 
clear for the Court and the public that the proposed consent decree 
does not authorize EPS to impose any branding restrictions for smart 
cards or reflect any conclusion by the Department about the 
competitive significance of any potential EPS restrictions regarding 
smart cards. Such a clarification would not require any substantive 
changes to the proposed consent decree. Instead, the Department 
could clarify the meaning of the proposed consent decree in the 
response to the public comments that it submits to the Court 
pursuant to Section 2(b) of the Antitrust Procedures and Penalties 
Act, 15 U.S.C. Sec. 16(b).
    The development of smart card technology and networks offers 
enormous potential benefits to the public. Citicorp urges the 
Department to keep a watchful eye in order to prevent 
anticompetitive conduct by EPS that could hinder the full 
development of smart card technology and its applications.

      Respectfully submitted,
A. Douglas Melamed
Martha Aaron Ross
Wilmer, Cutler & Pickering,
2445 M Street, N.W., Washington, DC 20037-1420, (202) 663-6000.
Counsel for Citicorp Credit Services, Inc.

    July 11, 1994.

July 6, 1994.
Mr. Richard Rosen,
Chief, Communications and Finance Section, Room 8104, U.S. 
Department of Justice, Antitrust Division, 555 4th Street, NW., 
Washington, DC 20001.

    Dear Mr. Rosen: I wish to state my opposition to the exception 
provision offered in the Consent Decree against EPS, Inc. regarding 
the limited branding of Smart Cards.
    Sepcifically, the exception will eventually undermine the intent 
of the Decree to allow for greater competition if allowed to stand 
without greater clarity. EPS should not be permitted to have a 
privileged posture on limited branding for cards containing an 
intergrated chip simply because they are heavily into its 
innovation. Future growth of this technology will require greater 
acceptance and access considerations to wit this provision ignores. 
Make the better and far more universal interpretation that branding 
of all types of cards is in the greater interest of competition and 
eliminate this loophole provision.

      Respectfully,
William R. Kennedy,
Board Member, New England Network.

July 11, 1994.
Mr. Richard Liefesbind,
Assistant Chief Communications & Finance Section, U.S. Department of 
Justice, Antitrust Division, Room 8104, 555 Fourth Street, NW., 
Washington, DC 20001.
Re: United States v. Electronic Payment Services, Inc. (EPS)

    Dear Mr. Liefesbind: On behalf of Meridian Bancorp, Inc., 
``Meridian,'' a bank & financial services holding company 
headquartered in Reading, Pennsylvania, I would like to make the 
following comments to the Consent Decree relating to the branding of 
electronic stored value cards (smart cards).
    It is our opinion that the provision in Section IV (H) which 
would allow EPS to ``restrict the branding of access cards that 
contain an integrated circuit computer chip with stored value 
function'' is contrary to the competitive provisions being decreed 
in the balance of paragraph H. This exemption implies that EPS would 
be able to regulate the market by mandating that it's member 
institutions only issue smart cards that carry the EPS brand, and 
that only cards that carry the sole EPS brand would be capable of 
accessing accounts at an EPS certified ATM machine. An issuer that 
belongs to other networks would have to issue secondary cards, at 
additional expenses, to allow it's customers access via non-EPA 
networks.
    Additionally, we would also like to point out the inconsistency 
in the implied assumption that a smart card is different from an 
ordinary ATM card which carries a magnetic stripe. It is quite 
likely that both features would have to co-exist on the same card to 
allow account access as well as ``refueling'' of the electronic chip 
at nationally branded terminals such as CIRRUS and PLUS outside of 
the EPS market area.
    By allowing EPS to dictate the non-branding of these cards a 
loophole has been created which would allow EPS to control network 
access of it's member banks and restrict the competitive potential 
of other regional networks. We feel that this exception should be 
removed from the Consent Decree and in fact specific language should 
indicate that smart card and smart card technology are included 
within the scope of the decree.

Sincerely,
Peter L. Andersen,
Vice President, Electronic Banking.

July 11, 1994.
Sent by Telecopier and Overnight Courier

Richard L. Rosen, Esq., Chief, United States Development of Justice, 
Antitrust Division, Communications and Finance Section, Room 8104, 
555 Fourth Street N.W., Washington, D.C. 20001.

Re: Proposed Consent Decree, The United States of America v. 
Electronic Payment Services, Inc. Civ. No. 94-0208

    Dear Mr. Rosen: Included with this letter is a copy of comments 
submitted today by Chemical Banking Corporation with regard to the 
proposed consent decree in the above-captioned action. A 
confirmation copy of these comments is also being sent to you today 
by overnight courier.
    If you have any questions concerning these comments, or if you 
fail to receive all four pages of the comment letter, please call me 
at your earliest convenience.

      Very truly yours,
Robert J. Egan
RJE:cv
Enclosure

cc: Michael Hegarty, Ronald A. Braco.

July 11, 1994.
United States Department of Justice,
Antitrust Division, Communications and Finance Section, Room 8104, 
555 Fourth Street NW., Washington, DC 20001.
Attention: Richard L. Rosen, Esq., Chief.

Re: Proposed Consent Decree, The United States of America v. 
Electronic Payment Services, Inc. Civ. No. 94-0208

    Ladies and Gentlemen: Chemical Banking Corporation 
(``Chemical'') appreciates this opportunity to comment on the 
proposed consent decree in the above captioned action (the ``Consent 
Decree''). All terms capitalized in this letter and not defined 
herein are used with the definitions assigned to them in the Consent 
Decree. Based on the analysis set out below, Chemical is concerned 
that Section IV-H of the Consent Decree may create a serious threat 
to competitors of EPS.

Background

    Chemical is a bank holding company incorporated in the state of 
Delaware which participates through certain of its subsidiary banks 
in many ATM networks. Chemical is also a shareholder in the New York 
Switch Corporation (``NYS'') which owns, operates and controls the 
New York Cash Exchange ATM network (the ``NYCE Network'') and will 
be a shareholder in the proposed network to be formed by the merger 
of the New York Switch Corporation and NENI Inc. when such network 
is approved. Chemical's subsidiaries, Chemical Bank and Chemical 
Bank New Jersey, N.A., are each a participant in both the MAC and 
the NYCE networks, among other ATM networks. Through its subsidiary, 
Chemical Bank, Chemical is working on projects involving the use of 
smart card technology and has implemented a pilot project using AT&T 
technology to test various smart card applications.

Analysis

    As a corporation which directly, and indirectly through its 
subsidiaries, is both an active participant in ATM networks and 
involved with the development and implementation of smart card 
technologies, Chemical is concerned about the potential anti-
competitive impact of that portion of Section IV-H of the Consent 
Decree that provides that ``Defendant [EPS] may * * * restrict the 
branding of access cards that contain an integrated circuit computer 
chip with stored value function * * *'' The cards described in the 
quoted language of the Consent Decree are commonly referred to as 
``smart cards.'' If the Consent Decree were to be adopted in its 
present form, EPS would have the right to impose such restrictions 
for a period of ten years. Depending on how defendant EPS availed 
itself of such right, it could place Chemical and its local bank 
subsidiaries at a distinct competitive disadvantage. If, for 
example, defendant EPS were to allow only the MAC brand to appear on 
any smart card used in the MAC Network or otherwise restrict the 
ability of other regional networks' brands to appear on a smart card 
used in that network, it cold force Chemical Bank and Chemical Bank 
New Jersey, N.A., along with other banks which have a significant 
customer base in the area where the MAC network now dominates, to 
issue two cards to each customer; one which would bear the MAC brand 
and would be for use in the MAC network and a second which would be 
for use in all other networks in which such banks participate, 
including the NYCE network. If the cost of such a two-card program 
proved too burdensome for some banks, this restriction cold lead to 
those banks issuing a single card bearing the MAC brand to those 
customers located in areas where the MAC Network had significant 
market-power. Such action would impede the possibility of another 
network being able to develop a customer base in MAC dominated areas 
sufficient to challenge the MAC Network.
    The Competitive Impact Statement which accompanies the Consent 
Decree seeks to justify this provision of the Consent Decree by 
stating that ``* * * restricting multiple branding of electronic 
stored value cards will not lessen the pro-competitive impact 
because `ordinary' ATM cards which are far more common will not be 
restricted.'' Competitive Impact Statement, fn 10, p. 16. This 
approach appears to assume that there would be two totally different 
types of cards used in the markets' EPS now dominates: ordinary ATM 
cards and ``smart cards.'' In fact, it is far more likely during the 
period in which the Consent Decree would be in effect that most 
financial institutions would issue cards that contained both forms 
of technology. In the pilot project implemented by Chemical Bank 
referred to above, the cards used contain both a chip and a magnetic 
stripe. This will be done in order to assure that the smart cards 
issued will continue to be usable in all of the ATM networks in 
which Chemical Bank is a member.
    Smart cards, with their enhanced capability and increased 
versatility, will certainly be the emerging technology for bank 
cards over the next ten years. For example, smart cards are seen as 
the desirable card for use in the area of government sponsored 
electronic benefit transfer programs.\1\ The rights granted to EPS 
with regard to smart cards could, if permitted to remain in the 
Consent Decree, influence significantly EBT programs in the states 
where EPS is now the dominate ATM and POS service provider. 
Therefore, to allow EPS to control the introduction of such cards 
effectively allows them to restrict what may well be the next stage 
of development for ``ordinary'' ATM cards as well as to restrict the 
deployment of cards which blend today's ``mag'' stripe technology 
with smart card enhancements. Such a result could extend EPS' 
control to new areas of the payment system beyond ATM and POS 
networks. If the language of the Consent Decree were modified to 
provide that EPS could not restrict branding with regard to any card 
which combined the smart card and magnetic stripe technologies, 
much--through not all--of the concern about this provision would be 
alleviated.
---------------------------------------------------------------------------

    \1\See, ``From Paper to Electronics: Creating a Benefit Delivery 
System That Works Better & Costs Less,'' Report of the Federal 
Electronic Benefits Transfer Task Force (May 1994) p. 32 et seq.
---------------------------------------------------------------------------

    The Competitive Impact Statement does not put forward any 
effective argument to support granting EPS this restrictive power. 
EPS itself is not a developer of smart card technology but has 
acquired technology from one of a group of companies which are 
developing such technology today. The Consent Decree expressly 
prohibits EPS from imposing restrictions on branding in other 
circumstance based on a finding of significant prior abuse by EPS 
yet allows it to restrict smart card deployment based solely on the 
view that such cards are not widely used today and that such an 
approach will encourage innovation and technology among those 
developing smart card technology. By allowing EPS to restrict 
branding in the case of smart cards, EPS could effectively limit 
access to the MAC network to only those entities utilizing a 
technology it approves. Based on 1993 transaction volumes, the MAC 
network is the largest regional ATM network in the country, greater 
in size than the next two networks combined.\2\ Using this power it 
could secure a preferential price from a vendor of smart card 
technology in exchange for the exclusive right to be the vendor of 
the only technology used in the MAC network. This could have a 
chilling effect on the development of smart card technology and 
grant to EPS and to its shareholder banks the ability to have a 
serious impact on the technological innovations of their competitors 
without any justification.
---------------------------------------------------------------------------

    \2\See, American Banker, July 5, 1994, p. 12.
---------------------------------------------------------------------------

Conclusion

    For the reasons stated, Chemical urges the Justice Department to 
strike that portion of Section IV-H which allows EPS any right to 
restrict the use of smart cards in the MAC network. Alternatively, 
the language of this Section should be modified to limit to cards 
that contain only smart card technology and that the restrictions on 
branding will be subject to regular review by the Department of 
Justice to assure their reasonableness.

      Very truly yours,
Ronald A. Braco

July 11, 1994.
By Telecopy and Courier

Richard Rosen, Esq.,
Chief, Communications and Finance Section, Room 8104, U.S. 
Department of Justice, Antitrust Division, 555 Fourth Street, N.W., 
Washington, D.C. 20001.

Richard Liebeskind, Esq.,
Assistant Chief, Communications and Finance Section, Room 8104, U.S. 
Department of Justice, Antitrust Division, 555 Fourth Street, N.W., 
Washington, D.C. 20001.

Re: Comments of Money Station, Inc. on Proposed Final Judgment in 
United States v. Electronic Payment Services, Inc., Civ. No. 94-208, 
D. Del.

    Gentlemen: Money Station, Inc. (Money Station) submits this 
comment pursuant to 15 U.S.C. Sections 16(b), (d), on the proposed 
Final Judgment in United States vs. Electronic Payment Services, 
Inc. published on May 12, 1994, at 59 Fed. Reg. 24711 et seq.
    According to the Competitive Impact Statement published along 
with the proposed Final Judgment, Electronic Payment Services, Inc. 
(EPS) has maintained a ``tying arrangement that is per se unlawful'' 
by foreclosing independent third-party ATM processors (id. at 24718) 
as ``has maintained a monopoly in regional ATM network access'' 
(id.) in numerous states, including ``substantial portions of the 
state of Ohio'' (id). The proposed Final Judgment is intended to 
advance the public interest in both a direct and an indirect way. 
The intended direct benefit is to increase competition in the market 
for ATM processing services by eliminating the tying arrangement. 
The intended indirect benefit is to increase competition in the 
market for regional ATM access by making it possible for banks to 
join multiple ATM networks through third-party ATM processors.
    Money Station operates an ATM network principally located in 
Ohio, but which also has participants located in Kentucky, Indiana 
and West Virginia (where EPS is also alleged to have monopoly power) 
with ATM machines that bear the Money Station trademark and are 
linked to the Money Station network. Money Station represents 
exactly the kind of potential and actual competition that the 
Government looks to as a means of making the market for regional ATM 
access more competitive in the geographic areas where MAC is 
currently the ubiquitous network with market power. Consequently, 
Money Station has reviewed the proposed Final Judgment carefully.
    Money Station agrees with the Government that elimination of the 
tying arrangement, if effectively implemented, will open up 
competition for ATM processing services. Money Station, however, has 
far less confidence that competition in ATM processing services can 
overcome the ``collective action program,'' referred to in the 
Competitive Impact Statement, in the market for regional ATM access. 
(Id. at 24720.) There are genuine economic costs associated with 
joining more than one regional network (e.g., card issuance costs, 
signage costs). Unless multiple banks act simultaneously to join one 
or more competing networks in addition to the ubiquitous network, no 
benefits can accrue to the individual bank that joins one or more 
such competing networks. In other words, no bank will incur the 
costs to join network B in addition to the ubiquitous network A 
unless network B provides sufficient ATMs and cards that the bank's 
transaction volume flowing through network B generates enough income 
(or savings) to justify the costs associated with joining network B. 
That transaction volume depends on the actions of other banks. This 
``collective action'' problem is exacerbated if the ubiquitous 
network with market power is able to establish any disincentives 
(whether technical or economic) against joining other networks.
    Nevertheless, Money Station recognizes that elimination of the 
tying arrangement challenged in the complaint in this case, if 
effectively implemented, does open up competition for ATM processing 
services and is thus in the public interest. Money Station further 
recognizes that elimination of the tying arrangement, again if 
effectively implemented, is a necessary first step, even if not a 
totally sufficient step, in opening up the market for regional ATM 
access and so, again, is in the public interest. Money Station 
therefore supports the proposed Final Judgment as a general matter.
    To ensure, however, the effectiveness of the proposed Final 
Judgment, Money Station recommends that several issues be addressed 
before the proposed Final Judgment is approved.
    First, the same card that provides access to ATMs also usually 
provides access to POS devices, and virtually every ATM network, 
including the networks operated by EPS and Money Station, also 
operates a POS network. As Money Station reads the proposed Final 
Judgment, EPS is free in the future to place restrictions on members 
of its MAC network (which operates both a POS and ATM network) with 
respect to their right to be members in other POS networks or even, 
possibly, on their right to use third-party processors for their POS 
outlets. Such POS-related restrictions, if imposed, would add to the 
entry barriers in regional ATM access already created by the 
``collective action'' problem. The proposed Final Judgment should be 
clarified so that access to the MAC ATM network or to the MAC POS 
network is not denied, impeded, or discriminated against through 
pricing or other means if a financial institution elects to join a 
competing POS network.\1\
---------------------------------------------------------------------------

    \1\Money Station believes that EPS enjoys a position of 
dominance with respect to access to regional POS networks that is 
comparable to the dominant position EPS has maintained in markets 
for regional ATM network access.
---------------------------------------------------------------------------

    Second, the proposed Final Judgment uses the phrase ``shall not 
restrict in any manner'' or similar phrases several times. For 
example, Section IV(H) mandates that ``Defendant shall in no manner 
restrict any depository institution ATM deployer from enabling ATMs 
to function in multiple ATM networks.'' There is no definition of 
the verb ``restrict'' in the proposed Final Judgment. The proposed 
Final Judgment clearly does prohibit directly exclusionary contracts 
and discriminatory pricing related to ATM network membership. 
However, it is not clear that the proposed Final Judgment deals 
effectively with various other disincentives that EPS may establish 
that would further discourage banks from incurring the already 
significant costs and risks of joining multiple networks. Although 
the proposed Final Judgment does prohibit penalties imposed on or 
direct legal obstructions to a bank's joining a competitive network, 
it is not clear that a reward for not joining to competitive network 
is a restriction under the proposed Final Judgment. Given EPS's 
history of practices to preserve its monopoly in the regional ATM 
access, it seems prudent to clarify that the phrase ``shall not 
restrict'' bars any practice that creates disincentives for a bank 
to belong to multiple networks.
    Third, Section IV(G)(2) of the proposed Final Judgment appears 
on its face to give EPS the discretion, with respect to transactions 
between depository institutions that are members of an EPS network 
and switched by a third-party processor, to impose a royalty fee 
equal to the price of transactions switched (i.e., processed) by EPS 
itself. Because the third-party processor must charge some fee to 
cover its costs in this situation, the combination of a license fee 
equal to EPS's fee (referred to in this provision as ``loyalties 
that shall not be greater than the price for switched 
transactions'') plus the third-party processor's fee will 
necessarily exceed EPS's direct fee. Therefore, this provision 
appears to give EPS a means to continue to hamper severely third-
party processors seeking to dissipate EPS's monopoly power. This may 
well negate the effectiveness of the proposed Final Judgment's 
intent to open up competition in the ATM processing services and, 
indirectly, in regional ATM access. In Money Station's view, Section 
IV(G)(2) should either be revised or clarified.
    Fourth, Money Station believes that skeptical scrutiny should be 
given to the provision in Section IV(H) that permits EPS to 
``restrict the branding of access cards that contain an integrated 
circuit computer chip with a stored value function.'' This language 
is an exemption for what are known as ``smart cards'' from the 
requirement in Section IV(H) that EPS cannot bar ATM card issuers 
that choose to be affiliated with multiple ATM networks from issuing 
cards that display multiple ATM network logos or from displaying 
multiple ATM network logos on their ATMs. Money Station believes 
that this exemption could well have a powerful anti-competitive 
effect on the development and competitiveness of ATM networks other 
than EPS. This effect would occur if EPS took the position that the 
exemption language applied to access cards that contain both a 
normal ``mag stripe'' feature--as do most ATM cards--as well as a 
``smart card'' feature. If so, and if EPS inserted a ``smart card'' 
feature on an appreciable number of cards with a traditional ``mag 
stripe'' feature,\2\ the multi-branding purpose of Section IV(H)--
which seeks to sustain the competitiveness of other ATM networks--
would be undermined. In addition, Money Station is concerned that as 
a result of this exemption, EPS will require that ATM or POS 
machines that are part of EPS's network may not accept ATM or POS 
cards with a ``smart card'' feature other than that utilized or 
approved by EPS. In this event, the pro-competitive purpose of 
preventing EPS from barring co-branding of ATM machines would also 
be undermined. To the best of Money Station's knowledge, EPS is not 
a developer of ``smart card'' technology, but simply a customer of 
developers of that technology. Money Station thus believes that the 
theory cited in support of the exemption--``that * * * restrictive 
branding of electronic stored value cards will encourage innovation 
and competition'' in connection with such cards\3\--has no 
applicability to EPS.

    \2\Money Station believes that this is highly likely because EPS 
is likely to want its access cards to work at ATM machines that lack 
an EPS trademark, but contain the PLUS or CIRRUS trademarks and that 
are configured only to accept cards with a ``mag stripe.''
    \3\59 Fed. Reg. 24721, n. 10.
---------------------------------------------------------------------------

      Respectfully submitted,
A. Edward Gough,
President.

July 11, 1994.
By Hand Delivery

Richard L. Rosen, Esquire,
Chief, Communications and Finance Section, Antitrust Division, U.S. 
Department of Justice, 555 4th Street, N.W.--Room 8104, Washington, 
DC 2001.

Re: United States v. Electronic Payment Services, Inc. Civ. No. 94-
208 (D.Del.).

    Dear. Mr. Rosen: I am writing on behalf of The New York Switch 
Corporation (``NYS'') to comment on the proposed Stipulation, Final 
Judgment (``the decree''), and Competitive Impact Statement in 
United States v. Electronic Payment Services, Inc. (``EPS''), Civ. 
No. 94-208, as set out at 59 Fed. Reg. 24711 (May 12, 1994). NYS 
operates the NYCE ATM/POS network. For many years, NYCE 
has been foreclosed from competing against EPS' MAC 
network in Pennsylvania and other states where MAC has successfully 
established monopoly power through the very types of exclusionary 
practices which are the subject of the decree. By prohibiting its 
members from joining NYCE or selecting NYCE as their processor, EPS 
has largely succeeded in insulating itself from competition from 
NYCE, as well as from other regional ATM networks and third party 
processors, in Pennsylvania and a number of other states.
    The remedial purpose of the proposed decree is to check EPS' 
market power by facilitating the entry of competing regional ATM 
networks and ATM processors into markets in which EPS has heretofore 
exercised market power through various exclusionary practices. To 
that end, the decree would prohibit EPS from restricting its 
depository institution members from belonging to other networks; 
under the decree, EPS also cannot restrict any depository 
institution from (i) ``displaying multiple ATM network logos on its 
ATMs''; (ii) ``issuing cards that display multiple ATM network 
logos''; or (iii) ``enabling ATMs to function in multiple ATM 
network.''\1\ NYS applauds the Department of Justice for bringing 
this action and for achieving the foregoing remedial provisions, 
which NYS supports.
---------------------------------------------------------------------------

    \1\59 Fed. Reg. at 24717.
---------------------------------------------------------------------------

    What concerns NYS is the ambiguity and potential for abuse of 
the exception permitting EPS to ``restrict the branding of access 
cards that contain an integrated circuit computer chip with a stored 
value function''\2\ (referred to as ``smart cards''). According to 
the Competitive Impact Statement, the Department has concluded that 
``[p]ermitting EPS to restrict the multiple branding on smart cards 
will not undercut the impact of the decree because the branding of 
ordinary ATM cards, which are not by far more common, is not 
restricted.''\3\ In conjunction with this statement, the Department 
cites the contention of EPS ``that allowing restrictive in services 
among firms marketing such cards.''\4\
---------------------------------------------------------------------------

    \2\Id. (emphasis added).
    \3\Fed. Reg. at 24721, n.10.
    \4\Id.
---------------------------------------------------------------------------

    NYS believes that this provision, which is an exception to the 
general prohibitory thrust of the decree, creates a potential 
loophole which EPS could interpret to perpetuate its exclusionary 
practices with respect to ATM cards. For this reason, while NYS 
generally supports the decree, it nevertheless urges the Department 
to withhold its consent unless the exception is modified or 
clarified as suggested below to reduce its anticompetitive 
potential.

I. Tunney Act Standards

    As the Department well knows, the Tunney Act, under which these 
comments are permitted, is intended to ensure that antitrust consent 
decrees serve the public interest. As the court in the recent 
Airline Tariff Publishing case pointed out, one of the tests for 
determining whether the entry of a proposed consent judgment is in 
the public interest is whether the proposed decree ``effectively 
opens the relevant markets to competition and prevents the 
recurrence of anticompetitive activity.'' United States v. Airline 
Tariff Publishing Co., 1993-2 Trade Cas. (CCH)  70,409 at 71,167 
(D.D.C. Nov. 1, 1993, quoting United States v. American Del. and 
Del. Co., 552 F. Sup. 131, 153 (D.C. 1982), aff'd sub. mom., 
Maryland v. United Sates, 460 U.S. 1001 (1983). Using language that 
is applicable here, the court inquired whether the proposed final 
judgment ``Using language that is applicable here, the court 
inquired whether the proposed final judgment ``prohibit[ed] both 
behavior that the government receives to be a current antitrust 
violation and behavior that could enable the settling defendants to 
devise methods through which to engage in anti competitive 
behavior.''\5\
---------------------------------------------------------------------------

    \5\Airline Tariff Publishing Co., 1993-2 Trade Cas. (CCH) at 71, 
168 (emphasis added).
---------------------------------------------------------------------------

    NYS submits that the ambiguous language of the smart-card 
exception (i.e., ``cards that contain'' the stored value function) 
could allow EPS to continue its exclusionary conduct with respect to 
ATM cards simply by merging the ATM cards with smart-card 
functionality. The Competitive Impact Statement does not appear to 
recognize the ability of EPS to take advantage of the smart-card 
exception to avoid the prohibitions of the decree. Based on its 
knowledge of the impending market impact of smart cards, NYS 
strongly believes that the Department must directly address the 
anticompetitive potential of this ambiguous smart-card exception.

2. The Smart Card Exception Undermines the Purposes of the Decree

    EPS has established a pattern of excluding competitors by 
conditioning its financial institutions' membership on their 
agreement not to belong to other networks and not to use the brands 
of those networks on their cards and ATMs. NYS is concerned that the 
smart-card exception could be interpreted and exploited by EPS to 
subvert the general prohibitions in the decree against ATM and ATM 
card branding restrictions. Through this exception, EPS would be 
able to convert its ATM cards to dual-function cards and escape the 
prohibitions of the decree, to the detriment of NYS competition 
generally.
    The Department's acceptance of the smart-card exception appears 
to rest on two premises: one is that stored value cards, with their 
computer-chip component, are so distinct from ``ordinary ATM cards'' 
(which rely on magnetic stripe technology) that the exception will 
not significantly affect the member institutions' use of ``ordinary 
ATM cards'' which are the primary focus of the Complaint; the other 
premise appears to be that the current number of smart cards is 
still relatively low compared with the number of ordinary ATM cards 
and that any anticompetitive consequences of the exception will 
therefore be negligible. NYS disagrees with both premises.
    It cannot be assumed that ``ordinary ATM cards'' and smart cards 
are and will remain separate, stand-alone devices. NYS has reason to 
believe that the smart card being marketed by EPS to financial 
institutions is not, in fact, a product separate from the ordinary 
ATM card but is instead a hybrid, multi-function card that contains 
both a computer chip with stored value functionality and a magnetic 
stripe with on-line debit functionality. This dual functionality in 
a single card is already being tested and its use is likely to 
increase substantially in the near future. Moreover, as several 
industry publications disclose, EPS intends to offer a multi-purpose 
smart card which is basically a combination ATM/stored value card. 
For example, one source reports that:

    Consumers will get a micro-chip smart card that also has a mag-
stripe on back. The card will be available for both on-line debit 
and off-line prepaid debit applications. When consumers use the card 
in an ATM or on-line POS application, a terminal will read the mag-
stripe and when used in an off-line prepaid application, the 
terminal will read and deduct funds from the chip memory.\6\

    \6\Bank Network News, Vol. 11, No. 7, Aug. 26, 1992, at 7. See 
also American Banker, Feb. 12, 1993, at 3 (reporting that EPS stored 
value card ``doubles as an ATM card'').
---------------------------------------------------------------------------

    Nor is it correct to assume that the number of smart cards will 
remain relatively low. Although just emerging, smart-card 
applications are expected to expand rapidly. EPS apparently intends 
to market its smart card aggressively to financial institutions 
throughout its service area. While the Department correctly observes 
that the number of smart cards is now relatively small when compared 
with ordinary ATM cards, EPS has made it clear that it sees the 
potential for significant growth in the use of its hybrid ATM card 
with a computer chip.\7\
---------------------------------------------------------------------------

    \7\ABA Banking Journal, July 1993, at 68 (``MAC's 26 million 
card holders will still use their cards for ATM transactions, but 
those with the smart-card version will be able to load monetary 
value onto the cards at the ATMs, as well. EPS estimates there will 
be 20 million smart-card users by 1998.''); see also, American 
Banker, Feb 12, 1993 (reporting that EPS sees potential volume 
greater than ATM debit card programs).
---------------------------------------------------------------------------

    The decree explicitly bars EPS from restricting its members' 
branding of ATM cards. Yet, the intention and effect of the smart-
card exception are ambiguous. It is possible that EPS would be able 
to prohibit all of its member banks from placing the NYCE brand or 
other competing network brands\8\ on any card (including an 
``ordinary ATM card'') simply by adding a computer chip with stored 
value functionality to its cards, a modification which is neither 
difficult nor expensive.
---------------------------------------------------------------------------

    \8\Of course, the smart-card exception would also permit EPS 
selectively to allow dual branding with national network brands 
while prohibiting co-branding with NYCE and other regional network 
competitors. In this manner, EPS could exclude NYCE (one of its 
strongest competitors) from those very areas where, as the 
Competitive Impact Statement notes, the MAC network has a history of 
``largely successful efforts to keep competitors out. * * *'' 59 
Fed. Reg. at 24719.
---------------------------------------------------------------------------

    If the smart-card exception could be interpreted in the manner 
just suggested, the potential for exclusion of competing networks 
through the exception is not an imaginary concern. A recent article 
in the trade press has reported that Delaware financial institutions 
accounting for over 90% of the state's DDA base will issue EPS smart 
cards.\9\ As the Complaint notes, the MAC network already has a 
monopoly position in Delaware; virtually all Delaware financial 
institutions belong to MAC. Given MAC's dominance, the smart-card 
exception will offer MAC another vehicle for erecting a barrier to 
entry into the state. If the exception means that EPS can tell its 
financial institution members that they cannot put the NYCE brand on 
any MAC-branded cards because those cards also happen to contain an 
integrated computer chip for stored value functionality, those 
institutions will have to issue (at considerable cost) separate 
cards if they wish to offer access to NYCE. In those states where 
MAC already has a monopoly, it is difficult to see what possible 
incentive the financial institutions would have for joining NYCE at 
all.
---------------------------------------------------------------------------

    \9\Card FAX, May 23, 1994, at 1.
---------------------------------------------------------------------------

    Furthermore, the smart-card exception is ambiguous not only with 
respect to exclusive branding of cards but also with respect to 
exclusive branding of ATMs. Under the decree, EPS is barred from 
restricting its members' multiple branding of ATMs and from 
restricting ``any depository institution ATM deployer from enabling 
ATMs to function in multiple ATM networks.'' NYS is concerned, 
however, about ambiguity in the Competitive Impact Statement, where 
it says, ``EPS must permit MAC members to display multiple network 
marks on ATMs and ATM card, except for electronic stored value 
cards.''\10\ It is NYS' understanding that EPS' smart cards will be 
used in its existing ATMs which will be retrofitted to handle the 
additional smart-card functionality. If EPS is permitted, through an 
evasive interpretation of the smart-card exception, to refuse 
acceptance of smart cards bearing any brand other than its own at 
ATMs in its network the decree's objective of facilitating 
competitive access by other networks to customers in states where 
EPS has ATM dominance will be seriously undermined. This issue also 
requires clarification.
---------------------------------------------------------------------------

    \10\59 Fed. Reg. 2471 (emphasis added).
---------------------------------------------------------------------------

The Smart Card Exception Will Not Encourage Innovation and 
Competition

    In the Competitive Impact Statement, the Department acknowledges 
the following justification for the smart-card exception: ``allowing 
restrictive branding of electronic stored value cards will encourage 
innovation and competition in services among firms marketing such 
cards.''\11\ In NYS' judgment, this is not correct and does not 
justify the smart-card exception, even if the exception is meant to 
apply only to stand-alone smart cards; this reason certainly does 
not justify application of the exception to a combined ATM/smart 
card.
---------------------------------------------------------------------------

    \11\59 Fed. Reg. at 24721, n.10. It is clear that the Department 
concurs with this contention of EPS, but this reason appears to be 
offered as an explanation for the Department's lack of concern about 
the smart-card loophole.
---------------------------------------------------------------------------

    First, smart-card technology is not in any sense ``new'' or 
``unique''; it has been deployed widely in Europe and Japan for 
several years and is now being used in various applications in this 
country as well.\12\
---------------------------------------------------------------------------

    \12\Smart cards are used in both ``closed system'' and ``open 
system'' environments. ``Closed systems'' include both single-vendor 
stored value systems and systems designed for single-site use, such 
as a public transit system or a university campus. An ``open 
system'' refers to a multiple-vendor, multiple-site system, similar 
to a POS network in which the value stored on the card can be used 
at a wide range of participating vendors.
---------------------------------------------------------------------------

    Second, EPS is not truly an ``innovator'' with respect to smart-
card technology--rather, it is a single customer of the technology. 
The actual producers and innovators of smart-card technology are 
data-technology firms such as Schlumberger, GemPlus, Microcard, IBM 
and AT&T. To the extent the EPS' application of the technology makes 
any contribution to technological innovation or development, many 
other entities, including individual banks and the national credit 
card networks, are also actively engaged in the development of 
various payment-systems applications of smart-card technology.\13\
---------------------------------------------------------------------------

    \13\For example, NYS is aware that Chemical Bank has developed 
and is pilot-testing a card with an embedded, integrated circuit 
chip and a co-resident magnetic stripe, which allows holders to do 
regular ATM transactions and to pay for purchases with stored cash 
value. Chemical Bank's cards will be used in ATMs equipped with 
smart-card reader/writer capability. Citicorp is also reported to be 
testing a smart card. Bank Network News, Vol. 12, No. 16, January 
12, 1994, at 1.
---------------------------------------------------------------------------

    Most importantly, it is difficult to see how permitting EPS to 
restrict its member banks from putting the logos of NYCE and other 
networks on their smart cards in those states where EPS has market 
power will encourage innovation or technological competition. While 
NYS recognizes that, under certain conditions, a restriction on co-
branding of a product may stimulate interbrand competition (thereby 
stimulating innovation), this benefit is achievable only where the 
firm imposing the restriction is in fact subject to interbrand 
competition. The Complaint, however, makes clear that EPS has no 
competition in at least five states; in those states, EPS has the 
ability to lock financial institutions into use of a single smart 
card, thereby excluding any competition.
    In sum NYS believes that the smart-card exception will not 
promote innovation in the development of smart-card technology, even 
if the scope of the exception is confined to smart cards only. It is 
certain that an ambiguous exception which would permit evasion of 
the decree would not be not be justified on that basis.

Conclusion

    The intent and scope of the smart-card exception contained in 
Paragraph IV.H of the proposed decree are ambiguous. The exception 
is susceptible to an interpretation by which EPS could continue the 
exclusionary practices which the decree seeks to redress simply by 
adding the smart-card function to its ATM cards. surely the 
Department did not intend to create such a device for evasion of the 
decree. NYS respectfully submits that the exception should be 
amended to clarify that the exception applies only to the banding of 
stand-alone, single-function smart cards (those with stored value 
functionality provided by an integrated computer chip) and not to 
any type of multiple-function or hybrid ATM cards (those that use 
magnetic stripe technology).
    To repeat, NYS supports the general thrust of the proposed decree 
and greatly appreciates the efforts of the Department to open the MAC 
network to competition. Even so, the ambiguity of the smart-card 
exception and the potential for circumvention of the decree compel the 
submission of these comments and concerns.

      Very truly yours,
Gary S. Roboff,
President, The New York Switch Corporation.

cc: Mr. Richard Liebeskind, Assistant Chief, Communications and 
Finance Section.

July 11, 1994.
Mr. Richard Liebeskind,
Assistant Chief, Communications and Finance Section, Antitrust 
Division, U.S. Department of Justice, 555 Fourth Street, NW., Room 
8104, Washington, DC 20001.

United States of America v. Electronic Payment Services, Inc.

    Dear Mr. Liebeskind: The enclosed comments on the proposed Final 
Judgment in the above-entitled case are submitted pursuant to 15 
U.S.C. Sec. 16(b). The comments are being submitted on behalf of a 
client that has an interest in this matter, but prefers to remain 
anonymous. The client is deeply concerned that, were its name or 
that of its counsel known, the submission of these comments might 
cause it to suffer retaliation from its competitors. Accordingly, 
this letter, and the enclosed comments, are hereby submitted without 
signature or any other information that might indicate their source. 
Please submit the comments to the Court and publish the comments and 
the Department's response in the Federal Register, as provided in 
the Competitive Impact Statement and under the Tunney Act.

In the United States District Court for the District of Delaware

    United States of America Plaintiff, v. Electronic Payment 
Services, Inc., Defendant.

Comments on the Proposed Final Judgment, Pursuant to 15 U.S.C. 
Sec. 16(b)

    The following comments on the proposed Final Judgment in the 
above-captioned action are hereby submitted, pursuant to 15 U.S.C. 
Sec. 16(b). The comments are submitted on behalf of a client that 
does not wish its identity to be disclosed because of its concerns 
that its competitors might retaliate against it were its identity 
known.

Background

    There has been a steady shift in the credit card processing 
industry from processing of card transactions by financial 
institutions to processing by third party, non-financial 
institutions. The 1993 Edition of Card Industry Directory: The Blue 
Book of the Credit and Debit Card Industry of the United States 
(Faulkner & Gray) (hereinafter, ``the 1993 Card Industry 
Directory'') reported that the merchant processing business ``has 
come to be dominated by firms not controlled by banks, a trend that 
concerns some executives in the banking community.'' (See Exh. A.) 
The most recently available figures show that non-banks have moved 
to the top of the credit card processing business, with 3 of the top 
10 processors being institutions that are not affiliated with 
depository institutions. (See Exh. B, the 1994 Edition of Card 
Industry Directory: The Blue Book of the Credit and Debit Card 
Industry of the United States (Faulkner & Gray) (hereinafter, ``the 
1994 Card Industry Directory''), ``Top 25 Merchant Acquirers'' list, 
showing NaBANCO (#1), Card Establishment Services (#3) and National 
Data Corp. (#7) among the top 10 processors, with the top 10 
processors commanding more than 49% of the market.)
    The same trend is apparent in the point-of-sale (``POS'') debit 
and ATM processing markets.\1\ While those processing markets have 
traditionally been dominated by financial institutions (with EPS, 
the owner of MAC, being the largest of the top 5 Electronic Funds 
Transfer (``EFT'')\2\ Processors, by a significant margin), in 1993, 
2 non-financial institutions--Deluxe Data Systems and Electronic 
Data Systems--were included among the top 5 EFT Processors. (See 
Exh. C, 1994 Edition of the Debit Card Directory: The Complete Guide 
for the Debit Card Industry in the United States (Faulkner & Gray) 
(hereinafter, the ``1994 Debit Card Directory'') at p.22.)
---------------------------------------------------------------------------

    \1\Cards issued by depository institutions and activated by the 
holder's entry of a personal identification number (PIN) can be used 
in ATMs located at financial institutions and in or near retail 
establishments, as well as in point-of-sale (POS) debit terminals at 
merchants. When the card is used in an ATM, the cardholder enters 
his personal identification number. The transaction is then 
authorized by the financial institution that issued the card, the 
cardholder receives the authorized amount of cash, and the 
depository account to which the card is tied is debited by that 
amount. When the card is used in a POS terminal for a debit 
transaction, the transaction likewise begins with entry of the 
cardholder's PIN and an on-line authorization of the transaction 
from the card-issuing financial institution. Once the transaction is 
approved, the customer receives the merchandise or services and, in 
many cases, cash back from the merchant (in rough analogy to paying 
for groceries with a check for more than the amount of the 
purchase). A hold is then immediately put on the customer's funds on 
deposit for subsequent payment to the merchant.
    \2\EFT (or Electronic Funds Transfer) is the movement of funds 
from one source to another using electronic transmission over 
telecommunications networks.
---------------------------------------------------------------------------

    Like the market for processing services, the market for 
ownership of ATMs and other similar devices has expanded well beyond 
depository institutions. However, the judgment is somewhat ambiguous 
as to its application to ATMs owned by entities other than 
depository institutions. It should be clarified to provide that all 
ATMs, and not just ATMs owned by depository institutions, are 
included within its scope. Today, six non-depository institutions 
rank among the top 300 ATM owners, owning more than 3,000 terminals. 
(See Discussion, infra, under Comment No. 1.)
    Second, and more significantly, the judgment fails to reach the 
overlapping and interchangeable POS debit market. (See Discussion, 
infra, under Comment No. 2.) According to a survey published by 
Faulkner & Gray in 1993, in the next 7 years significant growth is 
expected in the EFT market, which encompasses both ATM and POS. 
Until now, the growth in EFT has primarily been fueled by ATM 
growth. While ATM growth is expected to continue, it is projected 
that the most sizeable increases in the EFT market will come from 
debit POS. Many networks have predicted that POS alone will grow by 
more than 50% a year and, that by the year 2000, POS transactions 
will exceed ATM transactions. (See Exh. D, 1994 Debit Card 
Directory, Chapter 9, Section 1.) If POS grows at such rates, the 
failure of the proposed judgment to include debit POS could render 
it less and less effectual as time progresses and the EFT market 
changes.
    Moreover, it is not apparent that the Department of Justice 
conducted a thorough review of the existing operating, technical, 
and financial requirements that restrict third party processors' 
access to the network, or the pricing mechanisms governing such 
access, to ensure that the order truly provides third party 
processors with meaningful, non-discriminatory access to the 
network. As discussed in Comments 3 and 4, below, the operating, 
technical and financial regulations, and the complex pricing 
structure imposed by MAC and other networks, have the potential to 
pose a mine field, severely restraining third party entry to the 
processing market. Those regulations and pricing must be examined 
carefully and safeguards need to be put in place to assure future 
compliance with the judgment.
    Accordingly, in order for the judgment to meet the Department's 
goal of eliminating MAC's monopoly power in card processing in the 
affected region, the proposed Final Judgment must (1) extend to ATMs 
owned by non-depository institutions; (2) encompass the debit POS 
network; (3) require the Department of Justice to review operating, 
technical, and financial restrictions placed on third party 
processors by the ATM and debit networks and put related safeguards 
into place to ensure that the networks provide meaningful access by 
third party processors; and (4) require the Department of Justice to 
examine the pricing structure of the networks, and put certain 
safeguards into place, to be certain that the costs assessed to 
third party processors are truly non-discriminatory.
    Specifically, the following modifications must be made to the 
proposed Final Judgment:

Comment No. 1

    The Final Judgment should be clarified to include ATMs owned and 
deployed by non-depository institutions, as well as those owned and 
deployed by depository institutions.

Discussion

    Section II.B of the proposed Final Judgment defines ``ATM'' as a 
machine ``typically owned and deployed by a depository 
institution.'' The first sentence of section II.H defines depository 
institution as ``a bank, saving bank, savings and loan association, 
credit union or other institution authorized by federal or state law 
to take deposits.'' In a second sentence, Section II.H of the 
judgment goes on to state that, for purposes of the Final Judgment, 
depository institution includes ``any other member of a branded ATM 
network operated by defendant that also deploys ATMs within that 
network.''
    While ATMs have traditionally been owned by depository 
institutions, a growing number of non-depository institutions are 
entering the ATM market. For example, the 1993 Card Industry 
Directory boasted among its list of the ``Top 300 ATM Owners'' two 
supermarket chains, Publix Super Markets, Inc. and Wegmans Food and 
Pharmacy, which, obviously, lack the demand deposit accounts 
necessary to constitute a ``depository institution'' within the 
meaning of the first sentence of section II.H. (See Exh. E., which 
ranks Publix as the 21st largest ATM owner in the United States with 
483 ATMs, and Wegmans as number 106 with 91 ATMs.) The 1994 Debit 
Card Directory showed a marked increase in the number of non-
depository institutions owning ATMs and the number of ATMs owned by 
those institutions: the number of non-depository institutions owning 
ATMs increased from two to six, and the number of ATMs owned by such 
non-depository institutions increased from 574 ATMs (in 1992) to 
3343 (in 1993). (See Exh. F, listing Electronic Data Systems Inc. as 
number 7, with 1,200 ATMs; Affiliated Computer Systems as number 10, 
with 950 ATMs; Publix as number 28 with 497 ATMs; FIserv as number 
29, with 496 ATMs; Delchamps Supermarkets as number 98, with 100 
ATMs; and Wegmans as number 100, with 100 ATMs.)
    In light of the rapidly changing identity of the ATM owners, the 
failure to expressly include in the Final Judgment ATMs owned and 
deployed by non-depository institutions creates a substantial 
potential loophole in the judgment. As the judgment will remain in 
effect for the next 10 years, such a possible loophole could have an 
adverse effect on competition. Unless the judgment is clarified to 
include ATMs owned and deployed by non-depository institutions, the 
goals of the judgment--to open up the ATM network and ATM processing 
markets to competition by prohibiting MAC from discriminating 
against third party processors in terms of pricing and access--will 
not be effectuated in this growing segment of the ATM market.

Comment No. 2

    The Final Judgment should apply not only to Us, which perform 
the traditional functions of dispensing cash, account inquiry, 
payment authorization, transfer or deposit, but also to retail 
point-of-sale (``POS'') card acceptor machines that perform debit 
transactions, that is, POS terminals that allow consumers to use 
bank cards linked to demand accounts to pay for services or 
merchandise and, often, receive cash back from the merchant, and 
contemporaneously debit the customer's depository account.

Discussion

    Cash (ATM) and debit (POS) terminals provide the same service. 
They are sufficiently interchangeable that consumers view them as 
substitutes for one another and utilize them for many of the same 
transactions.\3\ (See United States Department of Justice Horizontal 
Merger Guidelines (1992) at 1.1, Trade Reg. Rep. (CCH) 13,104 at 
p. 20,572 (1992).) MAC has a significant presence in both the ATM 
and POS terminal markets, as set forth below. Accordingly, all card 
acceptor machines, and not merely ATMs, should be included within 
the terms of the Final Judgment.
---------------------------------------------------------------------------

    \3\Among some industry specialists, cards are beginning to be 
known simply as ``access devices'' and the terminals that accept 
them, whether for an ATM, debit or credit transaction, as acceptors 
of access devices.
---------------------------------------------------------------------------

    Debit transactions at U.S. merchants utilizing POS terminals 
with PIN-pads have risen substantially over the last few years. The 
June 1993 issue of The Nilson Report (Issue 549) (the leading news 
and advisory service for credit/debit-card executives) reports that, 
in 1992, debit card transactions at U.S. merchants with PIN-pad POS 
terminals were up 30% from 1991, sales volume was up 47%, and the 
number of POS terminals with PIN pads was up 77%. (See Exh. G.)
    As the 1993 Card Industry Directory indicates (at p. 193), the 
debit card is positioning itself to ``rival the credit card as a 
payment system.''
    ``With MasterCard and Visa busily wooing card issuers to joint 
their respective Maestro and Interlink national on-line point-of-
sale programs, the debit card finally is reaching a position to be 
more than an ATM access device. Consequently, debit card issuers 
have shifted their attention away from simply getting more cards 
into account-holders hands and toward activating the cards already 
out there. The objective is to position debit as a revenue generator 
that could someday rival the credit card as a payment system.''\4\
---------------------------------------------------------------------------

    \4\The national debit networks operated by VISA and MasterCard 
under the ``Interlink'' and ``Maestro'' logos, respectively, differ 
from the previously existing VISA and MasterCard debit cards. 
Interlink and Maestro transactions must be generated on POS PIN-pad 
terminals and, once approved, result in an automatic hold on the 
customer's deposit account. Traditional VISA and MasterCard debit 
transactions do not incorporate PIN security and do not place a hold 
on the cardholder's account.
---------------------------------------------------------------------------

    In addition to its dominance in the ATM market, MAC has a 
significant, and growing, presence in the debit POS market. At year-
end 1992, MAC operated the third largest PIN-based debit system in 
the United States (ranked by transaction volume). (See Exh. G.) In 
that year, MAC showed the strongest growth of the top 5 PIN-based 
debit systems (with the top 5 systems switching 84% of all 
transactions) and offered the largest terminal base. (See id.)\5\
---------------------------------------------------------------------------

    \5\The numbers attributable to MAC in The Nilson Report did not 
include the ninth rank Owl system, which at that time was in the 
process of reissuing all of its cards to carry the MAC name. (See 
Exh. G.)
---------------------------------------------------------------------------

    MAC's position in debit POS continued to grow and strengthen. 
According to the 1994 Card Industry Directory, the four institutions 
that own defendant EPS--Banc One Corp., PNC Financial Corp., Key 
Corp. a/n/a Society Corp. and CoreStates--rank 7th, 13th, 22nd and 
27th among the ``100 Most Active Debit Card Bases.'' (See Exh. H.) 
Moreover, the 1994 Debit Card Directory shows that EPS is the second 
largest Electronic Funds Transfer Network (ATMs and POS terminals 
combined) (see Exh. I) and the third largest POS network, with MAC 
doubling the number of its on-line terminals from 15,000 in 1992 to 
32,000 in 1993 (see Exh. J. 1994 Debit Card Directory at pp. 25-26). 
Indeed, of the top 50 EFT networks in 1993, MAC was the fastest 
growing EFT Network in the country, with a 78% increase in 
transactions. (See Exh. I, p. 33.)
    To the ultimate consumer, ATM and POS are interchangeable 
because they meet the same needs. MAC is a major factor in both 
segments of the market. As POS terminals increasingly rival ATMs and 
credit cards as payment mechanisms, the interests of the United 
States in opening both the network and the processing markets now 
dominated by MAC to competition could be frustrated unless the Final 
Judgment is extended to encompass POS. Because the Final Judgment is 
to remain in effect for 10 years, the failure to make that judgment 
applicable to point-of-sale debit networks could leave that 
substantial, fast-growing segment of the market subject to the same 
abuses by MAC that the ATM system has been and allow MAC to evade 
the purpose and intent of the order.

Comment No. 3

    The Final Judgment should (a) provide for a comprehensive review 
by the Department of Justice of the MAC operating procedures to 
determine that the existing operating procedures and associated 
technical financial requirements do not impose requirements on third 
party processors, or give MAC control over unnecessary devices or 
equipment, that could give MAC the ability to, effectively, exclude 
competitive processors; and (b) require MAC, in the future, to 
publish and circulate to third party processors all proposed changes 
in the operating regulations at the same time that such changes are 
circulated to intercept processors.

Discussion

    The goal of the Final Judgment is to open up the processing 
market to competition. Section IV.E of the Final Judgment requires 
defendant EPS to permit third party processors to access the MAC 
network on the same terms as intercept processors so long as the 
third party processor meets the technical, financial and operating 
criteria for intercept processors. It also permits MAC to impose 
such additional technical criteria, regarding information 
transmitted and the format for transmission of such information, as 
is ``reasonably appropriate for third party ATM processing for 
unaffiliated multiple banks.''
    In the abstract, requiring MAC to give third party processors 
access to the MAC network on the same terms as intercept processors 
is, potentially, an adequate means to achieve the United States' 
goal. However, the existing technical, financial and operating rules 
and procedures applicable to intercept processors should not be 
endorsed by entry of a consent decree unless and until they have 
been thoroughly reviewed by persons with the requisite expertise.
    Experience in numerous industries has shown that, where a 
dominant service provider controls access to a network with which 
competitors must interconnect, the standards and protocol set for 
interconnection are ripe with potential for abuse by the dominant 
network owner. Probably the best known example of such abuse comes 
from the conduct of AT&T during the existence of the Bell system 
monopoly. For example, as discussed in Litton Systems, Inc. v. 
American Telephone & Telegraph Company, 487 F. Supp. 942 (S.D.N.Y. 
1982), aff'd. 700 F.2d 785 (2d Cir. 1983), AT&T required all 
telephone systems using non-Western Electric/Bell equipment to 
purchase a protective coupling device from AT&T, and to pay AT&T to 
install and maintain the device. It was ultimately determined that 
the device was not, in fact, needed to protect the AT&T network from 
harm, but was designed for anticompetitive reasons. See also United 
States v. American Tel. & Tel. Co., 524 F. Supp. 1336 (D.D.C. 1981). 
Similar findings were made as to the technical requirements imposed 
on competitors such as MCI and Sprint. See, e.g., MCI Communications 
v. American Tel. & Tel. Co., 708 F.2d 1081 (7th Cir. 1983).
    The ATM and debit card processing businesses are rife with 
similar opportunities for dominant networks like MAC to manipulate 
interconnection requirements and related financial and operating 
procedures to exclude competitors by imposing on third party 
processors operating rules or technical and financial requirements 
with little or no legitimate business purpose--rules and procedures 
designed to raise the costs to third party processors and thereby 
frustrate competition. For example, one of the ``hottest'' technical 
developments in the field relates to the method of encryption (or 
coding) of transactions to ensure their security as the cardholder's 
request is transmitted from the terminal to the network to the card 
issuing institution, and the authorization and transaction 
instructions are transmitted through the network, back to the 
terminal. Currently, MAC and others operate on a ``master key'' 
system, under which all transactions from the terminal are given the 
same code. Many networks have indicated that they intend to change 
to a ``DUKPT'' system, where every transaction will be given a 
unique key. Many processors, however, are not presently equipped to 
operate on a DUKPT system, and they will require very substantial 
lead time (and need to invest substantial funds) to modify or 
replace existing equipment. (For example, in the credit card 
processing industry, the lead time for implementing changes 
reflecting technological advances often ranges from 3 to 5 years.)
    Security of customer transactions is clearly a legitimate 
concern of the networks. However, before DUKPT or other technical 
advances are implemented, the Department of Justice should have 
mechanisms in place to ensure the changes meet legitimate needs and 
that they are implemented in a pro-competitive manner. Particularly 
in a business undergoing rapid technological change, a mechanism is 
needed both to insure that the rules and regulations of the monopoly 
provider are not designed to inhibit competition by other providers 
using existing technology and, at the same time, insure that the MAC 
network be open to competitors using new and technologically 
superior equipment.\6\ Accordingly, before the Department of Justice 
recommends that the current rules governing intercept processors be 
applied to third party processors, it should review MAC's technical, 
financial, and operating rules and determine that those standards do 
not have a negative impact on competition.
---------------------------------------------------------------------------

    \6\Technical requirements are not the only area where card 
processors have already experienced abuse by dominant providers. For 
example, ATM and debit networks have been known to impose upon third 
party processors unwarranted and unjustified delays in transferring 
money to third party processor funding accounts. They have also 
required processors to send significant numbers of their employees 
to network training sessions and charged prohibitive per employee 
fees, where training of a small number of supervisory employees 
would suffice.
---------------------------------------------------------------------------

    To ensure compliance by MAC with its obligation under the 
judgment to impose on third party, unaffiliated, multiple bank 
processors only such additional technical criteria as is 
``reasonably appropriate,'' and to be sure that all subsequent 
modifications and additions to regulations and operating procedures 
made to keep pace with changing technology are necessary and do not 
discriminate against third party processors, the decree should 
require MAC to publish and circulate to third party processors for 
comment such modifications before their enactment. At a minimum, MAC 
should be required to make those rules and procedures available to 
third party processors at the same time that they are available to 
intercept processors. Providing third party processors with the 
right to review and comment on proposed technical requirements could 
give third party processors the opportunity to recommend less costly 
but equally secure measures (if such measures are available and 
adequate) and, in any event, would ensure that third party 
processors are informed of technical changes in a timely fashion so 
that they can comply with such changes. These proposed modifications 
to the proposed Final Judgment will promote industry self-regulation 
and assure that third party processors are not frozen-out by 
unnecessary technical, financial or operational requirements, or 
changes made to those requirements on short notice.

Comment No. 4

    The present pricing structure for access by third party 
processors to the network should be evaluated and modified to 
require MAC (a) periodically to publish its pricing schedules; (b) 
to unbundle its switch fee to third party processors; and (c) to 
eliminate the requirement that third party processors be sponsored 
by a MAC member.

Discussion

    Section IV.G prohibits MAC from discriminating in the pricing of 
branded ATM network access to the MAC network on the basis of a 
customer's choice of ATM processor. Specifically, section G.1 of the 
Final Judgment mandates that third party processors receive the same 
volume discounts as intercept processors. Section G.2 provides that 
royalties charged to third party processors to switch transactions 
between member depository institutions not be greater than the price 
charged by MAC to switch such transactions. Section G.3 requires MAC 
to provide branded ATM service pursuant to a nondiscriminatory price 
schedule. While these three limitations are helpful in fixing a 
pricing structure that reduces barriers to entry by third party 
processors, the proposed Final Judgment does not go far enough in 
that regard. The Department of Justice apparently has not examined 
the pricing mechanisms by which third party processors are 
constrained and has not taken sufficient measures to assure that 
existing discriminatory pricing practices have been eliminated.
    In the case of ATM transactions, a third party processor is 
ordinarily assessed a per transaction driving (or switch) fee, a one 
time network (or membership) fee and, where the processor is a not a 
financial institution, it must be sponsored by a member financial 
institution and pay that institution a sponsorship fee (which could 
be a one time or a per transaction fee). Similarly, in the case of 
debit POS transactions, a third party processor pays a switch fee, a 
network (or membership fee, and a sponsorship fee.
    To be certain that the order achieves its goal of eliminating 
discriminatory pricing and opening up the processing market to 
competitors of MAC, the judgment should:
    A. Mandate regular publication of MAC's prices, including volume 
discounts, so as not to discriminate against smaller competitors.
    This is a simple, inexpensive means of policing MAC's obligation 
to offer non-discriminatory prices pursuant to a non-discriminatory 
pricing schedule.
    B. Require MAC to unbundle its switch fee.
    Currently, branded ATM networks charge third party processors a 
``switch fee'' for each transaction utilizing the network. That per 
transaction fee is a bundled rate, comprised of a charge to the 
third party processor for the costs to the network of electronically 
transferring the transaction information and a fee that is 
reimbursed to the card issuer. The bundled rate has the effect of 
causing third party processors to bear a disproportionate share of 
the issuer's costs.
    Charging a unitary fee for bundled services is a classic form of 
anticompetitive abuse by a monopolist. Causing MAC to unbundle its 
switch fee will foster competition by allowing MAC's competitors to 
decide which services they desire to purchase and requiring them to 
pay only for those services actually used.
    C. Eliminate the requirement that, in addition to paying an 
``acquirer'' membership fee, third party processors be sponsored by 
a member financial institution.
    In addition to the per transaction switch fee, MAC charges third 
party processors a membership fee. MAC, however, prohibits non-
depository, third party processors from becoming full-fledged 
members of MAC. Instead, under the guise of maintaining the 
integrity of the MAC network, MAC requires that every third party 
processor be sponsored by a MAC member; each sponsoring MAC member, 
in turn, requires the third party processor to pay a substantial 
sponsorship fee. Those requirements, by definition, discriminate 
against non-depository institutions that act as third party 
processors and deter competition in the processing market, without 
serving any legitimate business need.

Conclusion

    In light of the 10-year life of the consent decree, it is 
critical that the Department of Justice close the loopholes 
described above before the court endorses the judgment so that the 
judgment will keep pace with the changing nature of the industry, 
and its rapid technological advances and thus, remain effective into 
the next century.

    To:

Richard Liebeskind, Esq.,
Assistant Chief, Communications and Finance Section, Antitrust 
Division, U.S. Department of Justice, 555 Fourth Street, NW., room 
8104, Washington, DC 20001.

Exhibit A

Card Industry Directory: The Blue Book of the Credit and Debit Card 
Industry in the United States (Faulkner & Gray) pp. 23-24, 1993 
Edition

the resources needed to promote use of their cards. Old-line 
retailers are particularly hard-pressed, and those programs have 
born the brunt of market retrenchment. New competitors such as 
specialty stores typically secure the services of third-party 
private-label card issuers instead of managing their own store-card 
programs, so that segment of the market is gaining on single-store 
cards.
    Major issuers of Visa and MasterCard are as likely to fill the 
role of third-party issuer as any other entity, and some of them are 
scoring remarkable successes. One standout program is the Select 
card issued by First of America Bank in partnership with home-
improvement retailers such as furniture stores, carpet firms, and 
home centers. Those merchants sell the type of big-ticket items that 
are most likely to need revolving credit, so the profit potential is 
significant for the issuing bank. The merchants pay a flat monthly 
charge for acceptance, so they save money on their discount rates. 
And cardholders get a lower APR than most Visa and MasterCard cards 
command.
    Bankruptcy filings continued to take a toll on private-label 
cards, both proprietary plastic and third-party cards. Zale Corp.'s 
bankruptcy filing and liquidation in 1992 eliminated a major portion 
of the private-label portfolio at NationsBank, which also ranks as 
the 10th largest bank card issuer.

BANKS' DIMINISHED MERCHANT ROLE

    In the merchant processing business, consolidation is 
accelerating, with the five largest processors commanding more than 
60% of the market. This part of the credit-card distribution system 
has come to be dominated by firms not controlled by banks, a trend 
that concerns some executives in the banking community. The trend is 
continuing, with Citicorp leaving the merchant arena in mid-1992. It 
sold Citicorp Establishment Services to venture capitalists who also 
own the industry's largest independent sales organization.
    But the trend has an up-side for some issuers. The growth of 
third-party processors has helped smaller card issuers maintain a 
niche in the market, analysts point out. Those issuers have been 
relieved of the need to maintain in-house processing services while 
still enjoying the efficiencies of scale those processors bring. The 
biggest third-party processors also are the most frequently cited 
merchant and cardholder processors used by the top 250 card issuers: 
FDR rates 85 mentions in Chapter 4, and Total System is cited 60 
times.
    Sheer size enables the largest issuers to process in-house, and 
efficiencies of scale are getting better for many of them. Three 
major bank mergers affected the 10 largest bank card issuers since 
the directory's third edition was published. Manufacturers Hanover 
Trust, the 10th largest a year ago, was merged into Chemical Bank to 
form the eighth largest issuer. NCNB and C&S/Sovran combined to form 
NationsBank. And BankAmerica maintained its position as the fourth 
largest card issuer on the strength of its April 1992 merger with 
Security Pacific Bank.
    Mergers will keep the consolidation trend going. Comerica Bank 
already has merged with Manufacturers National Corp., and card 
operations were consolidated in August 1992. Security Bank & Trust 
merged with First of America in April 1992, with merger of the 
respective credit card operations expected by mid-October. On May 2, 
1992, Merchants National Corp. merged with National City Corp., 
adopting the name National City Indiana in October.
    The portfolio sale which drove consolidation in recent years 
became a non-factor after mid-year 1991. Whether they return to 
their old prominence might depend on the overall health of the 
banking industry. A survey of banking executives conducted in 1991 
found 23% of those with total assets of $5 billion or more expected 
to sell their card portfolios by the end of the decade because of a 
need to raise capital. If capital conditions become more favorable, 
either through market forces or regulatory changes, many of those 
banks could decide to retain their portfolios.

AFFINITY CARDS ON THE WANE

    A credit card trend that may have run its course is the affinity 
card. Affinity programs reported by the 250 largest card issuers in 
the 1992 survey totaled 2,654, a moderate improvement from the 
previous year's 2,404. But if the marketing efforts of a single 
issuer, MBNA America, are factored out, a net loss occurred. MBNA 
lead the industry with 1,530 affinity programs, but a score of 
issuers report fewer affinity programs now than a year ago.
    All but two of the 250 credit card issuers in Chapter 4 are 
Visa/MasterCard issues, and the dominance of Visa plastic continues 
to grow. In the directory's first edition, 54.5% of those issuer's 
card were Visa. The following year the ration jumped to 57.1%., then 
57.5%. In this latest survey, the Visa share has climbed to 58.4%.
    One other trend not readily apparent in the pages that follow is 
the decline in the average number of cards per credit-card account. 
When the first edition of the directory was published three years 
ago, the top 250 issuers averaged 1.5 cards per account. The ratio 
has steadily declined in the intervening years and know stands at 
1.44 cards per account. That tent is more likely a reflection of the 
social trend toward more single-person households and greater 
numbers of women in the labor force than any concerted effort by 
card issuers to issue fewer cards per account.
    Likewise, the outlook for credit and debit profitability will 
probably be dictated by economic circumstances beyond the industry's 
control. But industry competition will also play a major role, and 
the chapters in this directory give the most complete presentation, 
segment by segment, of who the major competitors are and how they 
compare to the rest of the industry.

Exhibit B

Card Industry Directory: The Blue Book of the Credit and Debit Card 
Industry in the United States (Faulkner & Gray) pp. 363-367, 1994 
Edition

Chapter 8

The 25 Largest Merchant Acquirers

    Consolidation is occurring in every segment of the bank card 
business, but no where is the pace faster than in the merchant 
acquiring business. The 25 largest merchant acquirers presented in 
last year's edition of the Card Industry Directory accounted for 
48.75% of the Visa/MasterCard volume going through merchants; this 
year's roster held the merchant contracts that accounted for 64% of 
1992's billings. Concentration was especially pronounced at the top 
end of the market, with the 10 largest merchant acquirers 
representing $148.6 billion in bank card billings--49% of 1992's 
market, up from 33.7% in 1991.
    The number of merchant locations served by the leading acquirers 
did not change appreciably between January 1, 1992, and January 1, 
1993. The aggregate total of 1.6 million was only a 3 percent 
improvement, or 47,248 locations. But as the bank card industry 
expands the utility of Visa and MasterCard cards to include health 
care providers, grocers, movie theaters, and restaurants, the 
composite profile of the bank card merchant is changing. Still, the 
average value of credit card transactions in 1992 was virtually 
unchanged from 1991 at $65.48, the industry's leading merchant 
acquirers report.
    The most remarkable growth on an individual-acquirer basis 
occurred at National Bancard Corp., which jumped into the No. 1 
position on the strength of 36% dollar-volume growth. Most of 
NaBANCO's $10.5 billion dollar gain was the result of the 
acquisition of CFC Financial Services' merchant portfolio. Other big 
gainers in 1992 were NationsBank, which moved from eighth to fifth 
on the list; First USA Merchant Services, breaking into the top 10 
for the first time as the sixth largest acquirer; and First Premier 
Bank, the former First Interstate of South Dakota. First Premier 
entered the merchant acquiring business in 1989 and vaulted from the 
No. 13 position in 1991 to become the tenth largest acquirer.
    Two banks are new to the top 25 this year: National Bank of 
Detroit and Mercantile Bank. Dropping out of the industry's upper 
echelon are CFC Financial and MBNA America.
    Information in this chapter was compiled through direct contact 
with executives at the acquiring organizations. In situations where 
the information was unavailable, estimates were made on the basis of 
consultation with industry experts.

[Pages irreproducible. Pages are pp. 364-367 of Card Industry 
Directory: The Blue Book of the Credit and Debit Card Industry in 
the United States (Faulkner & Gray). Copies are on file with the 
United States District Court for the District of Delaware and the 
Antitrust Division of the United States Department of Justice.]

Exhibit C

Debit Card Directory: The Complete Guide for the Debit Card 
Industry in the United States (Faulkner & Gray) p. 22, 1994 Edition

                        The Top 5 EFT Processors                        
------------------------------------------------------------------------
                                                              Monthly   
                                                           transactions 
------------------------------------------------------------------------
Electronic Payment Systems..............................      89,500,000
Deluxe Data Systems.....................................     *58,000,000
Midwest Payments Systems................................     *55,500,000
BankAmerica.............................................      46,000,000
Electronic Data Systems.................................      42,000,000
------------------------------------------------------------------------
Source: National Automated Clearinghouse Association, Federal Reserve   
  Board.                                                                

Exhibit D

Debit Card Directory: The Complete Guide for the Debit Card 
Industry in the United States (Faulkner & Gray) pp. 187-191, 1994 
Edition

    The first eight chapters in this book describe the debit 
business as it is. What about the future? What shape will the 
industry take in the years leading up to the turn of the century? To 
answer these questions, we reprint here a major study published in 
1993 by Faulkner & Gray.
    The study, ``Debit Card 2000,'' surveyed the 45 largest debit 
card issuers and the top 35 networks to find out what kind of growth 
to expect, what new services and enhancements will arrive, and what 
developments to look for in national POS by 2000--just six years 
away.
    Some of the results are surprising, particularly if you've 
always viewed debit cards as a customer service rather than a profit 
center. That's now how issuers and networks in the near future will 
look at the product. By 2000, they say, there cold be as many as 1 
million POS terminals installed. Visa and MasterCard, meanwhile, 
predict there'll be 100 million off-line debit cards in force in six 
years, well beyond today's 15 million.
    If your plans depend on solid forecasts for the foreseeable 
future, the following pages should make useful reading.

 Table 2.--Issuers Annual Projected Debit Card Growth Between 1993-2000 
------------------------------------------------------------------------
                                                                Percent 
------------------------------------------------------------------------
Issuers expecting:                                                      
  1% to 3% annual card growth................................         55
  4% to 7% annual card growth................................         20
  8% to 12% annual card growth...............................          5
  13% to 20% annual card growth..............................         20
------------------------------------------------------------------------
Note: Projections exclude growth from mergers or acquisitions.          
                                                                        
Source: Bank Network News.                                              


              Table 3.--Debit Card Growth Between 1982-1993             
------------------------------------------------------------------------
                                                   Cards        Growth  
                     Year                        (millions)   (percent) 
------------------------------------------------------------------------
1993..........................................        209.1          2.1
1992..........................................        204.7          2.2
1991..........................................        200.3          4.6
1990..........................................        191.4          4.0
1989..........................................        183.9          7.6
1988..........................................        170.9         12.4
1987..........................................        152.0          8.6
1986..........................................        140.0          7.7
1985..........................................        130.0         30.0
1984..........................................        100.0         34.0
1983..........................................         74.6         24.3
1982..........................................         60.0           NA
------------------------------------------------------------------------
Source: Bank Network News.                                              


               Table 4.--Checking Account Saturation: 1993              
------------------------------------------------------------------------
                                                                Percent 
------------------------------------------------------------------------
Accounts with Cards today:                                              
  Less than 50%..............................................         11
  Between 50% and 60%........................................         14
  Between 60% and 70%........................................         25
  Between 70% and 80%........................................         21
  Between 80% and 90%........................................         11
  Over 90%...................................................         18
------------------------------------------------------------------------
Source: Bank Network News.                                              


                  Table 5.--Accounts With Cards in 2000                 
------------------------------------------------------------------------
                                                                Percent 
------------------------------------------------------------------------
Less than 50%................................................          0
Between 50% and 60%..........................................          0
Between 60% and 70%..........................................         17
Between 70% and 80%..........................................          9
Between 80% and 90%..........................................         22
Between 90% and 99%..........................................         39
100%.........................................................         13
------------------------------------------------------------------------
Source: Bank Network News.                                              


                   Table 6.--Current Activation Rates                   
------------------------------------------------------------------------
                                                                Percent 
------------------------------------------------------------------------
Less than 50%................................................         14
Between 50% and 60%..........................................         36
Between 60% and 70%..........................................         25
Between 70% and 80%..........................................          7
Between 80% and 90%..........................................          4
Over 90%.....................................................         14
------------------------------------------------------------------------
Note: Active is defined as using a card once a month.                   
Source: Bank Network News.                                              
                                                                        


              Table 7.--Projected Activation Rates in 2000              
------------------------------------------------------------------------
                                                                Percent 
------------------------------------------------------------------------
Less than 50%................................................          0
Between 50% and 60%..........................................         22
Between 60% and 70%..........................................         35
Between 70% and 80%..........................................         13
Between 80% and 90%..........................................         13
Over 90%.....................................................         17
------------------------------------------------------------------------
Note: Active is defined as using a card once a month.                   
                                                                        
Source: Bank Network News.                                              


              Table 8.--Network ATM Deployment Projections              
------------------------------------------------------------------------
                                                                Percent 
------------------------------------------------------------------------
Networks expecting:                                                     
  Less than 1% annual growth.................................         13
  1% to 3% annual growth.....................................         19
  4% to 7% annual growth.....................................         39
  8% to 12% annual growth....................................          3
  13% to 15% annual growth...................................         13
  Over 15% annual growth.....................................         13
------------------------------------------------------------------------
Note: Projections exclude growth due to mergers or acquisitions.        
                                                                        
Source: Bank Network News.                                              


               Table 9.--Issuer ATM Deployment Projections              
------------------------------------------------------------------------
                                                                Percent 
------------------------------------------------------------------------
Issuers expecting:                                                      
  Less than 1% annual growth.................................         14
  1% to 3% annual growth.....................................         36
  4% to 7% annual growth.....................................         18
  8% to 12% annual growth....................................         18
  13% to 15% annual growth...................................          9
  More than 15% annual growth................................         5 
------------------------------------------------------------------------
Note: Projections exclude growth due to mergers or acquisitions.        
                                                                        
Source: Bank Network News.                                              


                     Table 10.--ATM Growth 1982-1993                    
------------------------------------------------------------------------
                                                                Growth  
                     Year                           ATMs      (percent) 
------------------------------------------------------------------------
1993..........................................       94,822          8.6
1992..........................................       87,330          4.5
1991..........................................       83,545          4.2
1990..........................................       80,156          6.0
1989..........................................       75,632          4.3
1988..........................................       72,492          6.6
1987..........................................       68,000          6.3
1986..........................................       64,000          6.7
1985..........................................       60,000          9.0
1984..........................................       55,000         37.5
1983..........................................       40,000         21.2
1982..........................................       33,000           NA
------------------------------------------------------------------------
Source: Bank Network News.                                              


            Table 11.--Network Transaction Growth Projections           
------------------------------------------------------------------------
                                                                Percent 
------------------------------------------------------------------------
Networks expecting annual growth:                                       
  Between 1% and 5%..........................................         20
  Between 6% and 10%.........................................         15
  Between 10% and 15%........................................         10
  Between 15% and 20%........................................         15
  Between 20% and 30%........................................         20
  Between 30% and 40%........................................          5
  Between 40% and 50%........................................         15
------------------------------------------------------------------------
Note: Projections exclude growth due to mergers and acquisitions.       
                                                                        
Source: Bank Network News.                                              
                                                                        


            Table 12.--Issuer Transaction Growth Projections            
------------------------------------------------------------------------
                                                                Percent 
------------------------------------------------------------------------
Issuers expecting annual growth:                                        
  Less than 5%...............................................          0
  Between 6% and 10%.........................................         21
  Between 10% and 15%........................................         26
  Between 15% and 20%........................................         16
  Between 20% and 30%........................................         21
  More than 30%..............................................         16
------------------------------------------------------------------------
Note: Projections exclude growth due to mergers and acquisitions.       
                                                                        
Source: Bank Network News.                                              


                 Table 13.--Transaction Growth 1982-1992                
                       [Transactions in millions]                       
------------------------------------------------------------------------
                                                  Monthly      Percent  
                     Year                          volume       growth  
------------------------------------------------------------------------
1993..........................................        677.9          7.9
1992..........................................        628.1         13.5
1991..........................................        553.5         11.8
1990..........................................        495.2         13.2
1989..........................................        437.4         14.1
1988..........................................        383.1         12.5
1987..........................................        340.3         12.0
1986..........................................        304.0          2.2
1985..........................................        297.2         13.9
1984..........................................        261.0         30.5
1983..........................................        200.0         19.8
1982..........................................        167.0           NA
------------------------------------------------------------------------
Source: Bank Network News.                                              

Ballinger, senior vice president, expects over 80% will have one by 
2000. ``We'll never hit 100%, but I would like, in theory, to have a 
card in very customer's hands, ``Ballinger says.
    Issuers also expect the percentage of consumers with a debit 
card who use their card at least once a month to grow in the next 
seven years. While only about 25% of the issuers say their 
activation rates currently average more than 70%, 43% expect that 
their rates will exceed 70% by 2000. (See tables 6 and 7.)
    ``The activation rate continues to creep up, especially as 
younger users replace older customers,'' says Patricia Bauer, senior 
vice president of Minneapolis-based First Bank Systems. U.S. 
Bancorp's Kresge notes that POS is also pushing up activation rates 
with his customers as some who had no use for their debit cards at 
ATMs find they like using them at the point of sale.
    Like debit cards, new ATM deployment is expected to enjoy only 
modest growth. About 32% of the networks and 50% of the issuers 
expect the number of their ATMs to grow by less than 3% annually, 
while only 13% of the networks and 5% of the card issuers expect 
this growth to exceed 15% annually. (See tables 8 and 9.)
    A few networks and banks, however, are expecting more active new 
ATM deployment, particularly at off-premise locations. ``We have a 
tremendous amount of corporate relationships where we can put ATMs 
in work locations,'' says Fifth Third's Ballinger. ``We're looking 
at deploying 25 to 30 ATMs a year in the workplace. Some will pay us 
to install ATMs so they can get rid of or cut their cashier 
functions.''
    And some banks note they expect to deploy more new ATMs to 
perform non-traditional applications beyond cash withdrawals and 
accepting deposits. A few innovators already have been deploying 
advanced ATMs which can cash checks, issue account statements, sell 
stamps or allow consumers to apply for bank loans. ``The traditional 
cash withdrawals and deposit-taking terminals have leveled off,'' 
says Edward Gough, president of Ohio-based Money Station network. 
``But other ATM applications such as EBT will push ATM installations 
for expanded functions that will add to the growth of ATMs.''
    This projected growth is slightly less than the growth in recent 
years. In 1993, the number of ATMs in the U.S. grew by 8.6%. It grew 
by 4.5% in 1992, 4.2% in 1991, 5.9% in 1990 and 4.3% in 1989. (See 
table 10.) And projected growth is considerably less than the 
double-digit growth of the early 1980s.
    Despite modest expectations for debit card and ATM growth, 
networks and issuers have higher expectations for total EFT 
transactions. Executives expect the most growth in POS transactions 
while seeing growth of only 10% or less for ATM transactions. The 
result will be significant overall transaction growth.
    About 55% of the network executives and 53% of bank card issuers 
expect their EFT volume growth to exceed 15% annually. Another 26% 
of the issuers and 10% of the networks expect growth to be between 
10% and 15% annually. (See tables 11 and 12.)
    ``Between now and the end of the decade, the number of POS 
transactions will equal the number of ATM transactions,'' says 
Edward Gough, president of Ohio-based Money Station network. ``POS 
is now only 5% of our total volume.''
    Others also expect POS to lead the growth. ``We will see a lot 
of transaction volume growth,'' says Olen Thomas, vice president of 
Richmond, VA.-based Crestar Bank. ``The POS component of transaction 
volume could grow by 50% a year for the next two to three years.''
    Despite modest expectations for ATM transaction growth, network 
executives say it still will be healthy. ``We keep expecting the 
rate of growth in ATM transaction volume to slow, but last year it 
exploded,'' says James Martin, president of Wisconsin-based Tyme 
network. ``In POS, we expect a 55% increase in 1993 and we expect 
ATM volume to continue to grow 10% a year.''
    Networks projecting the lowest rate of growth--less than 10%--
typically do not offer or plan to offer POS and also do not have 
ambitious plans for other new electronic payments programs. These 
projections would indicate that POS, which finally seems ready to 
take off after years of hopeful expectations, will drive EFT volume 
increases in excess of the 12% to 14% growth that had been common in 
recent years. (See table 13.)
    Although POS has been growing slowly in recent years, new 
regional POS programs throughout the country, the advent of national 
POS programs, the skyrocketing level of acceptance of debit cards by 
supermarkets and penetration of POS into new markets like fast-food 
restaurants and specialty shops have raised the expectations of both 
network and financial institution executives.

Exhibit E

Card Industry Directory: The Blue Book of the Credit and Debit Card 
Industry in the United States (Faulkner & Gray) 1993 Edition

                                                                 The Top 300 ATM Owners                                                                 
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                            POS                                                                         
                          Bank                                ATMs       terminals                ATM vendor                     POS terminal vendor    
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. Bank of America, San Francisco, CA 94103..............        4,500       *3,500  InterBold, Fujitsu NCR, Omron........  N/A.                        
2. Citicorp, Lake Success, NY 11040......................        2,466            0  N/A..................................  None.                       
3. NationsBank Corporation, Charlotte, NC 28255..........        1,680            0  NCR, InterBold Fujitsu, Omron........  None.                       
4. Wells Fargo Bank, San Francisco, CA 94111.............        1,653       23,400  InterBold Fujitsu, NCR...............  N/A.                        
5. First Interstate Bancorp, Los Angeles, CA 90071.......        1,508        3,150  InterBold NCR........................  VeriFone.                   
6. Banc One Corp., Columbus, OH 43271....................        1,137          186  InterBold NCR........................  IBM, NCR, VeriFone.         
7. BayBank Systems Inc., Waltham, MA 02154...............          991            0  InterBold Fujitsu....................  None.                       
8. First Union National Bank, Charlotte, NC 28288-0362...          948            0  InterBold............................  None.                       
9. U.S. Bancorp, Portland, OR 97204......................          863           35  Fujitsu InterBold, NCR...............  VeriFone.                   
10. Fleet Financial Group, Providence, RI 02903..........          840            0  NCR, InterBold.......................  None.                       
11. Chemical Bank, New York, NY 10004....................          820            0  NCR, Fujitsu Omron...................  None.                       
12. Chase Manhattan Bank NA, New Hyde Park, NY 11042.....          684        3,400  InterBold............................  VeriFone.                   
13. PNC Financial Corp., Pittsburgh, PA 15222............          667        2,894  NCR, Fujitsu, InterBold, Diebold, IBM  Envoy, Diebold, VeriFone,   
                                                                                                                             Omron, NTN, NCR,           
                                                                                                                             Schlumberger.              
14. Society Corp., Cleveland, OH 44114...................          666          110  NCR, InterBold.......................  NCR, VeriFone Hypercom.     
15. First Bank System, Minneapolis, MN 55480.............          621          341  InterBold, NCR.......................  VeriFone.                   
16. Barnett Banks, Jacksonville, FL 32203................          620            0  InterBold, NCR.......................  None.                       
17. Mellon Bank, Pittsburg, PA 15258.....................          600            0  NCR, InterBold.......................  None.                       
18. National City Corp, Louisville, KY 40202.............          543            0  Diebold, ACS.........................  None.                       
19. Wachovia Corp., Winston-Salem, NC 27150..............          540          N/A  NCR, InterBold.......................  N/A.                        
20. Norwest Bank, Minneapolis, MN 55479-0005.............          511          N/A  InterBold, NCR, Fujitsu..............  N/A.                        
21. Publix Super Markets Inc., Lakeland, FL 33802........          483        4,700  NCR..................................  NCR.                        
22. Shawmut National Corp., Framingham, MA 01701.........          474            0  InterBold, NCR.......................  None.                       
23. Great Western Bank, a Federal Savings Bank,                    436            0  InterBold, NCR.......................  None.                       
 Northridge, CA 91328.                                                                                                                                  
24. First Fidelity Bancorporation, Newark, NJ 07102......          411          N/A  InterBold, Omron, NCR................  N/A.                        
25. SunBanks Inc., Orlando, FL 32809.....................          409            0  InterBold, NCR.......................  None.                       
26. First of America Bank Corp., Kalamazoo, MI 49009.....          405            0  InterBold, Docutel, NCR..............  None.                       
27. Home Savings of America, Whittier, CA 90601..........          401          N/A  NCR..................................  N/A.                        
28. KeyCorp, Albany, NY 12207............................         *400            0  InterBold, NCR, Fujitsu..............  None.                       
29. TCF Bank Savings FSB, Minneapolis, MN 55402..........          395            0  NCR, Fujitsu, InterBold..............  None.                       
30. NBD Bancorp, Troy, MI 48098..........................         *365            0  InterBold............................  None.                       
31. Comerica Inc., Detroit, MI 48275-2430................          361          358  InterBold............................  OMRON/-VeriFone.            
32. CoreStates, Philadelphia, PA 19101...................          322       12,224  InterBold, NCR, Fujitsu..............  Taltex, GTE, Citizen CBM.   
33. Valley Bank of Nevada, Las Vegas, NV 89101...........          316            0  InterBold............................  None.                       
34. Marine Midland, Buffalo, NY 14240....................          308            0  InterBold............................  None.                       
35. Michigan National Bank, Lansing, MI 48917............          300        1,000  InterBold............................  N/A.                        
36. Maryland National Bank, Baltimore, MD 21202..........          274           53  NCR, Fujitsu.........................  VeriFone, DataCard, Diebold.
37. Midlantic Corp., Edison, NJ 08818....................          267        1,500  InterBold, NCR.......................  VeriFone, Taltec.           
38. Bank South, Atlanta, GA 30302........................          266            0  Fujitsu, NCR, InterBold..............  None.                       
39. First American Metro Corp., McLean, VA 22102.........          253            0  NCR, InterBold.......................  None.                       
40. Meridian Bancorp Inc., Reading, PA 19603.............          253        4,000  NCR..................................  VeriFone.                   
41. State Employees' Credit Union, Raleigh, NC 27603.....          245            0  InterBold............................  None.                       
42. HomeFed Bank, San Diego, CA 92121-1710...............          240            0  NCR..................................  None.                       
43. Signet Bank, Richmond, VA 23219......................          227            0  NCR..................................  None.                       
44. Crestar Bank, Richmond, VA 23219.....................          220            0  InterBold, NCR, Omron................  None.                       
45. Valley National Corp., Phoenix, AZ 85004.............          219        4,000  InterBold............................  VeriFone, Hypercom.         
46. San Diego Financial Corp., San Diego, CA 92111.......          214            0  Unisys, InterBold....................  None.                       
47. United Jersey Banks/UJB Financial Corp., Princeton,            212        4,300  NCR..................................  Taltek, VeriFone, Omron,    
 NJ 08540-2066.                                                                                                              Envoy.                     
48. Boatmen's Bancshares Inc., St. Louis, MO 63101.......          208            0  InterBold, NCR, Fujitsu..............  None.                       
49. Union Bank, San Francisco, CA 94104..................          206            0  InterBold, Fujitsu...................  None.                       
50. First Chicago Corp., Chicago, IL 60670...............          200            0  Diebold, NCR.........................  None.                       
51. Glendale Federal Bank, Glendale, CA 91209............          199            0  Fujitsu..............................  None.                       
52. Dominion Bankshares Corp., Roanoke, VA 24019.........          181            0  Diebold, NCR.........................  None.                       
53. Trust Company Banks in Georgia, Atlanta, GA 30303....          178            0  NCR, InterBold.......................  None.                       
54. First Tennessee Bank NA, Memphis, TN 38101...........          177        1,500  InterBold, NCR, Fujitsu..............  Omron, VeriFone.            
55. California Federal, Rosemead, CA 91770...............          171            0  Fujitsu..............................  None.                       
56. First City Texas NA, Houston, TX 77002...............          170            0  InterBold, NCR.......................  None.                       
57. Southtrust Corp., Birmingham, AL 35203...............          170            0  InterBold, NCR.......................  None.                       
58. Central Fidelity Bank, Richmond, VA 23219............          165            0  InterBold............................  None.                       
59. Standard Federal Bank, Troy, MI 48084................          165            0  InterBold, NCR.......................  None.                       
60. The First National Bank of Boston--Massachusetts,              164            1  InterBold............................  N/A.                        
 Boston, MA 02106.                                                                                                                                      
61. Sunwest Financial Services, Albuquerque, NM 87103....          164        2,250  InterBold............................  VeriFone.                   
62. South Carolina National Bank, Columbia, SC 29226.....          163            0  InterBold, NCR.......................  None.                       
63. First National Bank of Maryland, Baltimore, MD 21201.          160          N/A  Fujitsu..............................  N/A.                        
64. AmSouth Bancorporation, Birmingham, AL 35288.........          157            0  InterBold, NCR.......................  None.                       
65. Integra Card Services, Pittsburgh, PA 15278..........          157            0  InterBold............................  None.                       
66. Bank of Hawaii, Honolulu, HI 96846...................          154            0  NCR, Docutel, InterBold, Fujitsu.....  None.                       
67. American Savings Bank, Irvine, CA 92713..............          152            0  NCR..................................  None.                       
68. Old Kent Financial Corp., Grand Rapids, MI 49503.....          152            0  InterBold............................  None.                       
69. First Citizens Bancshares, Raleigh, NC 27604.........          149            0  InterBold, NCR.......................  None.                       
70. Fifth Third Bank, Cincinnati, OH 45263...............         *145          N/A  N/A..................................  N/A.                        
71. First Virginia Banks Inc., Falls Church, VA 22046....          145            0  NCR, InterBold.......................  None.                       
72. Star Banc Corp., Cincinnati, OH 45202................          145           30  Docutel, InterBold...................  International Verifact.     
73. Bank of New York, New York, NY 10286.................          142            0  NCR, InterBold.......................  None.                       
74. St. Paul Federal Bank for Savings, Chicago, IL 60635.          142            0  Fujitsu, NCR, InterBold..............  None.                       
75. First Nationwide Bank, Sacramento, CA 95834..........          137            0  InterBold, NCR.......................  None.                       
76. Crossland Savings, Brooklyn, NY 11201................          135            0  NCR..................................  None.                       
77. First Security Corp., Ogden, UT 84409................          134            0  Diebold, NCR.........................  None.                       
78. Puget Sound Bancorp, Tacoma, WA 98411-5500...........          128          N/A  InterBold............................  N/A.                        
79. Commerce Bancshares, Kansas City, MO 64106...........          124            0  InterBold............................  None.                       
80. Manufacturers National Corp., Detroit, MI 48243......          124            0  Diebold, IBM, NCR....................  None.                       
81. Fourth Financial Corp., Wichita, KS 67202............          123            0  NCR, InterBold.......................  None.                       
82. Household Bank FSB, Schaumburg, IL 60173.............          123            0  InterBold, NCR.......................  None.                       
83. First American National Bank, Nashville, TN 37237....          121            0  InterBold............................  None.                       
84.Huntington National Bank, Columbus, OH 43287..........          120            0  NCR, Docutel.........................  None.                       
85.Union Planters Corp., Memphis, TN 38147...............          120            0  Docutel, InterBold, NCR..............  None.                       
86.First Alabama Bancshares, Montgomery, AL 36104........          119            0  Diebold, NCR, Fujitsu................  None.                       
87.Bank of the West, Santa Clara, CA 95054...............          116            0  Docutel, Diebold.....................  None.                       
88.First Bancorporation of Ohio, Akron, OH 44307.........          116            0  NCR, InterBold.......................  None.                       
89.Hibernia National Bank, New Orleans, LA 70130.........          111            0  InterBold, NCR.......................  None.                       
90.Navy Federal Credit Union, Merryfield, VA 22119-3000..          110            0  NCR..................................  None.                       
91.Sanwa Bank California, Monterey Park, CA 91754........          109            0  Fujitsu..............................  None.                       
92.Columbia Savings Federal Savings and Loan, Englewood,           106            0  Diebold, Docutel.....................  None.                       
 CO 80111.                                                                                                                                              
93.Premier Bank, Baton Rouge, LA 70808...................          105            0  InterBold, NCR.......................  None.                       
94Union Trust Co., Shelton, CT 06484.....................          105            0  InterBold............................  None.                       
95.BB&T Financial Corp., Wilson, NC 27893................          102            0  IBM, NCR.............................  None.                       
96.Riggs National Corp., Washington, DC 20005............          102            0  InterBold, Fujitsu...................  None.                       
97.First Commerce Corp., New Orleans, LA 70112...........          101            0  InterBold, NCR.......................  None.                       
98.Southern National Corp., Lumberton, NC 28358..........          100            0  InterBold............................  None.                       
99.United Carolina Bank, Monroe, NC 28110................          100            0  N/A..................................  None.                       
100.Marshall & Ilsley Corp., Milwaukee, WI 53202.........           98          N/A  NCR, Diebold.........................  VeriFone.                   
101.First Empire State Corp., Buffalo, NY 14240..........           96            0  InterBold............................  None.                       
102.Coast Federal Bank FSB, Grenada Hills, CA 91344......           95            0  IBM, NCR.............................  None.                       
103.People's Bank, Bridgeport, CT 06604..................           95            0  NCR, Omron...........................  None.                       
104.Mercantile Bancorporation, St. Louis, MO 63166.......           93            0  InterBold, NCR.......................  None.                       
105.Liberty National Bancorp, Louisville, KY 40202.......           92            0  NCR, InterBold.......................  None.                       
106.Wegmans Food and Pharmacy, Rochester, NY 14692.......           91        1,500  InterBold............................  VeriFone.                   
107.First Citizens Bancorp, Columbia, SC 29202...........           90            0  NCR..................................  None.                       
108.Equimark Corp., Pittsburgh, PA 15222.................           89            0  Fujitsu..............................  None.                       
109.First National Financial Corp., Albuquerque, NM 87103           89          769  IBM, Diebold.........................  Hypercom.                   
110.West One Bancorp/Award Network, Boise, ID 83707......           87            0  InterBold............................  None.                       
111.INB Financial, Indianapolis, IN 46266................           85            0  NCR, InterBold.......................  None.                       
112.Centura Bank, Rocky Mount, NC 27802..................           84            0  IBM, NCR.............................  None.                       
113.FirsTier Inc., Omaha, NE 68102.......................           83            0  NCR, InterBold.......................  None.                       
114.Keystone Financial, Altoona, PA 16601................           82            0  InterBold, NCR.......................  None.                       
115.Deposit Guaranty Corp., Jackson, MS 39215............           79            0  InterBold, NCR.......................  None.                       
116.Synovus Financial Corp., Columbus, GA 31901..........           79            0  InterBold............................  None.                       
117.United Missouri Bank, Kansas City, MO 64141..........           77            0  InterBold, NCR.......................  None.                       
118.Mercantile Bancshares, Baltimore, MD 21203...........           76            0  InterBold............................  None.                       
119.Zions Bancorporation, Salt Lake City, UT 84119.......           76            0  InterBold............................  None.                       
120.Harris Trust & Savings Bank, Chicago, IL 60690.......           75            0  InterBold, NCR.......................  None.                       
121.Gary-Wheaton Bank, Wheaton, IL 60187.................           71            0  InterBold............................  None.                       
122.One Valley Bank, Charleston, WV 25326................           71           80  InterBold............................  InterBold.                  
123.Commercial Federal Bank, a Federal Savings Bank,                70            0  InterBold, NCR.......................  None.                       
 Omaha, NE 68124.                                                                                                                                       
124.Sumitomo Bank of California, San Francisco, CA 94104.           69            0  NCR..................................  None.                       
125.Trustmark National Bank, Jackson, MS 39201...........           69            0  InterBold............................  None.                       
126.Great American Bank FSB, Phoenix, AZ 85012...........           67           81  Diebold, IBM.........................  VeriFone.                   
127.National Bank of Alaska, Anchorage, AK 99519.........           66          800  InterBold............................  ACI.                        
128.San Antonio Federal Credit Union, San Antonio, TX               66            0  Docutel, Olivetti....................  None.                       
 78201.                                                                                                                                                 
129.Emigrant Savings Bank, New York, NY 10017............           65            0  InterBold............................  None.                       
130.First Federal Savings & Loan of Lincoln, Lincoln, NE            63            0  NCR, InterBold.......................  None.                       
 68501.                                                                                                                                                 
131.The Golden 1 Credit Union, Sacramento, CA 95817......           61            0  InterBold............................  None.                       
132.First Gibraltar Bank FSB, Irving, TX 75063...........           60            0  NCR, Fujitsu.........................  None.                       
133.Wilmington Trust Co., Wilmington, DE 19890...........           60            0  NCR, Docutel.........................  None.                       
134.Bank of Delaware, Wilmington, DE 19801...............           59            0  NCR, InterBold.......................  None.                       
135. Central Carolina Bank & Trust Co., Durham, NC 27702.           59            0  NCR..................................  None.                       
136. National Commerce Bancorp, Memphis, TN 38150........           59            0  Fujitsu..............................  None.                       
137. Affiliated Bankshares of Colorado Inc., Denver, CO             58            0  InterBold............................  None.                       
 80202.                                                                                                                                                 
138. Baltimore Bancorp, Baltimore, MD 21203..............           58            0  InterBold............................  None.                       
139. Central Bancshares of the South, Birmingham, AL                58            0  InterBold, NCR.......................  None.                       
 35233.                                                                                                                                                 
140. Georgia Federal Bank, Atlanta, GA 30324.............           58            0  NCR..................................  None.                       
141. Team Bank, Bedford, TX 76021........................           57            0  NCR, InterBold, Omron................  None.                       
142. Dauphin Deposit, Harrisburg, PA 17105...............           53            0  NCR, InterBold.......................  None.                       
143. Multibank Financial Corp., Dedham, MA 02026.........           53            0  InterBold............................  None.                       
144. Alaska USA Federal Credit Union, Anchorage, AK 99519-          52            0  InterBold............................  None.                       
 6613.                                                                                                                                                  
145. The Bank of California, Escondido, CA 92029-1011....           52            0  Docutel, InterBold, NCR..............  None.                       
146. European American Bank, Uniondale, NY 11553.........           52            0  IBM..................................  None.                       
147. First National Bank of Omaha, Omaha, NE 68102.......           52            0  NCR..................................  None.                       
148. Dollar Bank, Pittsburgh, PA 15222...................           51            0  InterBold............................  None.                       
149. Apple Bank for Savings, New York, NY 10017..........           50            0  Unisys, Fujitsu......................  None.                       
150. Casco Northern Bank, Portland, ME 04104.............           50            0  InterBold............................  None.                       
151. Citizens Trust Co., Riverside, RI 02915.............           50            0  NCR..................................  None.                       
152. Third National Bank of Nashville, Nashville, TN                50            0  IBM, NCR.............................  None.                       
 37230.                                                                                                                                                 
153. Dime Savings Bank of New York, Port Washington, NY             49            0  NCR, InterBold.......................  None.                       
 11050.                                                                                                                                                 
154. First Federal Savings & Loan Association, Rochester,           49            0  NCR..................................  None.                       
 NY 14614.                                                                                                                                              
155. Great Lakes Bancorp, Ann Arbor, MI 48107-8600.......           49            0  InterBold, NCR.......................  None.                       
156. Summcorp, Fort Wayne, IN 46801......................           49            0  InterBold, NCR.......................  None.                       
157. Talman Home Federal, Chicago, IL 60629..............           49            0  NCR..................................  None.                       
158. United Postal Savings, St. Louis, MO 63122..........           49            0  NCR..................................  None.                       
159. First Federal of Michigan, Detroit, MI 48226........           47            0  NCR, Docutel.........................  None.                       
160. Sunburst Bank, Grenada, MS 38901....................           47            0  NCR, InterBold.......................  None.                       
161. Westamerica Bancorp, Novato, CA 94948...............           47            0  InterBold............................  None.                       
162. Bank of Oklahoma NA, Tulsa, OK 74192................           46            0  Fujitsu, NCR, InterBold..............  None.                       
163. FirstBank Holding Company of Colorado, Lakewood, CO            46            0  IBM, NCR.............................  None.                       
 80215.                                                                                                                                                 
164. Barclays Bank of New York, New York, NY 10265.......           45            0  NCR..................................  None.                       
165. First Eastern Corp., Wilkes-Barre, PA 18768.........           45           47  Fujitsu..............................  None.                       
166. Anchor Savings Bank, Wayne, NJ 07470................           44            0  Fujitsu, Docutel, InterBold..........  None.                       
167. The First Federal Savings Bank, Cleveland, OH 44114.           44            0  NCR..................................  None.                       
168. Commonwealth Bank, Williamsport, PA 17701...........           43          117  NCR, InterBold.......................  Taltek.                     
169. Investors Savings Bank, Richmond, VA 23235..........           43            0  InterBold............................  None.                       
170. Liberty Bank & Trust Co. NA, Oklahoma City, OK 73102           43            0  InterBold............................  None.                       
171. Texins Credit Union, Dallas, TX 75081...............           43            0  Docutel, Omron.......................  None.                       
172. Colorado National Bank of Denver, Denver, CO 80202..           42            0  InterBold............................  None.                       
173. First Security National Bank, Lexington, KY 40507...           42            0  Diebold, NCR.........................  None.                       
174. IBM Endicott/Owego Employees Credit Union, Endicott,           42            0  InterBold............................  None.                       
 NY 13760.                                                                                                                                              
175. Lincoln Financial Corp., Fort Wayne, IN 46801.......           42            0  InterBold, NCR, IBM..................  None.                       
176. National Bank of Commerce, Lincoln, NE 68501........           41            0  InterBold, NCR.......................  None.                       
177. Northeast Savings, Hartford, CT 06114...............           41            0  NCR..................................  None.                       
178. Pacific Western Bank, San Jose, CA 94113............           41            0  Burroughs, Diebold...................  None.                       
179. Arvest Bank Group, Bentonville, AR 72712............           40            0  Diebold..............................  None.                       
180. Northern Trust Corp., Chicago, IL 60675.............           40            0  InterBold............................  None.                       
181. Rochester Community Savings Bank, Rochester, NY                40            0  Omron, NCR...........................  None.                       
 14604.                                                                                                                                                 
182. Washington Mutual Savings Bank, Seattle, WA 98101...           40            0  Diebold, IBM, NCR....................  None.                       
183. Albany Savings Bank, Albany, NY 12207...............           39            0  NCR..................................  None.                       
184. Downey Savings, Newport Beach, CA 92660.............           39          N/A  Fujitsu..............................  POS Systems Inc.            
185. Hinsdale Federal Bank for Savings, Hinsdale, IL                39            0  EFMARK, NCR, InterBold, Fujitsu......  None.                       
 60521.                                                                                                                                                 
186. Bank of Mississippi, Tupelo, MS 38802...............           38            0  InterBold............................  None.                       
187. CCNB Corp., Camp Hill, PA 17011.....................           38          148  Diebold..............................  N/A.                        
188. Financial Trust Corp., Carlyle, PA 17013............           38           15  InterBold............................  Taltek.                     
189. Ohio Savings Bank, Cleveland, OH 44114..............           38            0  InterBold............................  None.                       
190. United Savings FSB Association of Texas, Houston, TX           38            0  Diebold..............................  None.                       
 77027.                                                                                                                                                 
191. BancFlorida, Naples, FL 33963.......................           37            0  InterBold............................  None.                       
192. Bank Western FSB, Denver, CO 80201..................           37            0  NCR, Docutel, InterBold..............  None.                       
193. EurekaBank, Redwood City, CA 94063..................           37            0  InterBold............................  None.                       
194. Philadelphia Savings Fund Society, Philadelphia, PA            37            0  InterBold............................  None.                       
 19104.                                                                                                                                                 
195. San Francisco Federal Savings, San Francisco, CA               37            0  InterBold............................  None.                       
 94104.                                                                                                                                                 
196. Central Trust Bank, Jefferson City, MO 65101........           36            0  InterBold, NCR.......................  None.                       
197. Chittenden Bank, Burlington, VT 05401...............           36            0  InterBold, NCR.......................  None.                       
198. New Dartmouth Bank, Hooksett, NH 03106..............           36            0  Diebold, IBM.........................  None.                       
199. CenterBank, Waterbury, CT 06702.....................           35            0  NCR, IBM, Burroughs..................  None.                       
200. CNB Bancshares Inc., Evansville, IN 47739-0001......           35            0  InterBold............................  None.                       
201. First Gibraltar Bank FSB, San Antonio, TX 78296.....           35            0  NCR..................................  None.                       
202. Dearborn Federal Credit Union, Dearborn, MI 48126...           34            0  InterBold............................  None.                       
203. Decatur Federal, Decatur, GA 30030..................           34            0  Diebold..............................  None.                       
204. Fulton Bank, Lancaster, PA 17604....................           34           21  InterBold, Fujitsu...................  Taltek.                     
205. Long Island Savings Bank, Melville, NY 11747........           34            0  Fujitsu..............................  None.                       
206. Construction Equipment Federal Credit Union, Peoria,           33            0  IBM, NCR.............................  None.                       
 IL 61656.                                                                                                                                              
207. First Peoples Bank of New Jersey, Haddon Twp., NJ              33          N/A  InterBold, NCR.......................  Taltek.                     
 08108.                                                                                                                                                 
208. Hughes Aircraft Employees Federal Credit Union,                33            0  InterBold............................  None.                       
 Manhattan Beach, CA 90266.                                                                                                                             
209. BankAtlantic, a Federal Savings Bank, Ft.                      32            0  NCR..................................  None.                       
 Lauderdale, FL 33310.                                                                                                                                  
210. Champion Federal Savings and Loan, Bloomington, IL             32            0  NCR, InterBold.......................  None.                       
 61701.                                                                                                                                                 
211. Citizens First Bancorp, Glen Rock, NJ 07452.........           32          550  InterBold............................  Taltek.                     
212. Independent Bank Corp., Rockland, MA 02370..........           32            0  N/A..................................  None.                       
213. American Federal Bank FSB, Greenville,SC 29602......           31            0  Diebold..............................  None.                       
214. Guaranty Federal Savings Bank, Austin, TX 78701.....           31            0  InterBold, NCR, Docutel..............  None.                       
215. First National Bank of Southwestern Ohio,                      29            0  InterBold, NCR.......................  None.                       
 Middletown, OH 45044.                                                                                                                                  
216. Provident Bank of Maryland, Baltimore, MD 21203-1661           29          N/A  InterBold............................  N/A.                        
217. The Cumberland Federal Savings Bank, Louisville, KY            28            0  NCR, InterBold.......................  None.                       
 40202.                                                                                                                                                 
218. Pentagon Federal Credit Union, Alexandria, VA 22313.           28            0  InterBold............................  None.                       
219. TransOhio Savings Bank, Cleveland, OH 44114.........           28            0  InterBold, NCR.......................  None.                       
220. First National Bank of Anchorage, Anchorage, AK                27            0  NCR..................................  None.                       
 99510.                                                                                                                                                 
221. Peoples Westchester Savings Bank, Hawthorne, NY                27            0  Diebold..............................  None.                       
 10532-0299.                                                                                                                                            
222. Primerit Bank FSB, Las Vegas, NV 89102..............           27           32  NCR, Diebold.........................  VeriFone.                   
223. Citizens Banking Corp., Flint, MI 48507.............           26            0  InterBold............................  None.                       
224. City National Bank, Beverly Hills, CA 90213.........           26            0  Docutel, InterBold...................  None.                       
225. Security Service Federal Credit Union, San Antonio,            26            0  InterBold............................  None.                       
 TX 78227.                                                                                                                                              
226. Vermont Financial Services, Brattleboro, VT 05301...           26            0  IBM, NCR.............................  None.                       
227. Capitol Federal Savings and Loan Association,                  25            0  NCR..................................  None.                       
 Topeka, KS 66603.                                                                                                                                      
228. Digital Employees Federal Credit Union, Maynard, MA            25            0  NCR..................................  None.                       
 01754.                                                                                                                                                 
229. America First Federal Credit Union, Ogden, UT 84409.           24            0  InterBold............................  None.                       
230. EST Bank, Elyria, OH 44035..........................           24            0  InterBold, NCR.......................  None.                       
231. First Bancorp of Kansas, Wichita, KS 67202..........           24            0  NCR..................................  None.                       
232. Standard Federal Savings Bank, Gaithersburg, MD                24            0  InterBold............................  None.                       
 20898-9481.                                                                                                                                            
233. West Suburban Bank, Lombard, IL 60148...............           24            0  InterBold............................  None.                       
234. Western Federal Savings, Marina del Ray, CA 90292...           24            0  NCR, Unisys..........................  None.                       
235. Bank of New Hampshire, Manchester, NH 03101.........           23            0  InterBold, NCR.......................  None.                       
236. Leader Federal Savings, Memphis, TN 38103...........           23            0  Docutel..............................  None.                       
237. Metropolitan Federal Savings Bank, Fargo, ND 58102..           23           20  NCR..................................  None.                       
238. Bank of A. Levy, Ventura, CA 93002..................           22            0  N/A..................................  None.                       
239. Commerce Bank and Trust, Topeka, KS 66611...........           22            0  InterBold............................  None.                       
240. Old National Bank, Evansville, IN 47708.............           22            0  InterBold, Fujitsu...................  None.                       
241. Teachers Federal Credit Union, South Bend, IN 46601.           22            0  InterBold............................  None.                       
242. Bay View Federal Bank FSB, San Mateo, CA 94403......           21            0  NCR..................................  None.                       
243. Farmers and Merchants Bank, Long Beach, CA 90802....           21          500  NCR..................................  Zon.                        
244. First Federal Savings Bank, Santurce, PR 00908......           21            0  NCR, InterBold.......................  None.                       
245. First National Bank of Gainesville, Gainesville, GA            21            0  InterBold............................  None.                       
 30501.                                                                                                                                                 
246. The Howard Bank, Burlington, VT 05402...............           21            0  InterBold............................  None.                       
247. Hudson City Savings Bank, Paramus, NJ 07652.........           21            0  InterBold............................  None.                       
248. Neworld Bank, Boston, MA 02110......................           21          N/A  N/A..................................  N/A.                        
249. Patelco Credit Union, San Francisco, CA 94105.......           21            0  Diebold..............................  None.                       
250. Telephone Employees Federal Credit Union, Pasadena,            21            0  InterBold............................  None.                       
 CA 91109-7058.                                                                                                                                         
251. Columbia First Bank, Arlington, VA 22209............           20            0  N/A..................................  None.                       
252. First Constitution Bank, New Haven, CT 06510........           20            0  NCR..................................  None.                       
253. National Bank of South Carolina, Sumter, SC 29150...           20            0  NCR..................................  None.                       
254. Provident Central Credit Union, Redwood City, CA               20            0  EDS..................................  None.                       
 94065.                                                                                                                                                 
255. Staten Island Savings Bank, Staten Island, NY 10304.           20            0  Omron, Diebold.......................  None.                       
256. Bethpage Federal Credit Union, Bethpage, NY 11714...           19            0  InterBold............................  None.                       
257. Central Jersey Bancorp, Freehold, NJ 07728..........           19            0  NCR..................................  None.                       
258. Eastern Financial Credit Union, Miami Springs, FL              19            0  InterBold............................  None.                       
 33166.                                                                                                                                                 
259. Farm & Home Savings Association, Nevada, MO 64772...           19            0  InterBold, IBM.......................  None.                       
260. First Federal Savings and Loan of Charleston,                  19            0  NCR..................................  None.                       
 Charleston, SC 29401.                                                                                                                                  
261. Magna Bank NA, St. Louis, MO 63134..................           19            0  InterBold, NCR.......................  None.                       
262. Mechanics Bank of Richmond, Richmond, CA 94806......           19            0  InterBold............................  None.                       
263. Bank of Vermont, Burlington, VT 05402...............           18            0  Diebold, NCR.........................  None.                       
264. Independence Savings Bank, Brooklyn, NY 11201.......           18            0  N/A..................................  N/A.                        
265. Lockheed Federal Credit Union, Burbank, CA 91510....           18            0  ATMC, NCR............................  None.                       
266. Mission Federal Credit Union, San Diego, CA 92191-             18            0  Burroughs............................  None.                       
 9023.                                                                                                                                                  
267. Union Bancshares, Wichita, KS 67201.................           18            0  Diebold..............................  None.                       
268. UST Corp., Boston, MA 02108.........................           18            0  IBM, NCR.............................  None.                       
269. Vermont Federal Bank FSB, Burlington, VT 05402......           18            0  NCR..................................  None.                       
270. Central Florida Educators Federal Credit Union,                17            0  InterBold, Omron.....................  None.                       
 Orlando, FL 32803.                                                                                                                                     
271. National Bank of Commerce, Charleston, WV 25301.....           17            0  NCR..................................  None.                       
272. North Fork Bank Corp., Mattituck, NY 11952..........           17            0  InterBold............................  Taltek, Datatrol.           
273. United States National Bank, Johnstown, PA 15901....           17          170  None.................................  None.                       
274. Boeing Employees Credit Union, Seattle, WA 98124....           16            0  NCR..................................  None.                       
275. Provident Savings Bank, Jersey City, NJ 07306.......           16            0  NCR, Diebold.........................  VeriFone (pending).         
276. Redstone Federal Credit Union, Huntsville, AL 35893.           16            0  InterBold............................  None.                       
277. Republic National Bank of Miami, Miami, FL 33144....           16            0  InterBold............................  None.                       
278. State Street Boston Corp., Boston, MA 02101.........           16            0  NCR, Fujitsu.........................  None.                       
279. Valley National Bancorp, Passaic, NJ 07055..........           16            0  IBM, Diebold.........................  None.                       
280. Charter Federal Savings & Loan, Bristol, VA 24201...           15            0  NCR..................................  None.                       
281. IBM Hudson Valley Employees Federal Credit Union,              15            0  InterBold............................  None.                       
 Poughkeepsie, NY 12601.                                                                                                                                
282. Republic National Bank, New York, NY 10018..........           15            0  NCR..................................  None.                       
283. Sunbelt Federal Savings FSB, Irving, TX 75016.......           15            0  InterBold, NCR.......................  None.                       
284. Broadway National Bank, San Antonio, TX 78209.......           14            0  Diebold..............................  None.                       
285. Carteret Savings Bank, Parsippany, NJ 07054.........           14            0  NCR..................................  None.                       
286. Central Corp., Monroe, LA 71211.....................           14            0  NCR..................................  None.                       
287. Columbia Banking Federal Savings and Loan Assn.,               14            0  InterBold............................  None.                       
 Rochester, NY 14614.                                                                                                                                   
288. First Financial Bank FSB, Stevens Point, WI 54481...           14            0  InterBold, NCR.......................  None.                       
289. First National Bank of Glens Falls, Glens Falls, NY            14            0  InterBold............................  None.                       
 12801.                                                                                                                                                 
290. Oak Tree Savings Bank, New Orleans, LA 70130........           14            0  NCR..................................  None.                       
291. Wilmington Savings Fund Society FSB, Wilmington, DE            14           68  NCR..................................  Teltek.                     
 19899.                                                                                                                                                 
292. Bank Leumi Trust Co., New York, NY 10017............           13            0  NCR..................................  None.                       
293. Bell Federal Savings and Loan Association, Chicago,            13            0  NCR..................................  None.                       
 IL 60603.                                                                                                                                              
294. Bucks County Bank & Trust Co., Doylestown, PA 18901.           13           98  Diebold..............................  Taltek, others.             
295. First Federal, LaCrosse, WI 54601...................           13            0  InterBold, NCR.......................  None.                       
296. McDonnell-Douglas West Federal Credit Union,                   13            0  InterBold............................  None.                       
 Torrance, CA 90502.                                                                                                                                    
297. Northwest Federal Credit Union, Herndon, VA 22070...           13            0  Docutel, Olivetti....................  None.                       
298. Randolph-Brooks Federal Credit Union, Universal                13            0  InterBold............................  None.                       
 City, TX 78148-2097.                                                                                                                                   
299. State Employees Credit Union of Maryland Inc.,                 13            0  NCR..................................  None.                       
 Towson, MD 21204.                                                                                                                                      
300. Trustco Bank, Schenectady, NY 12301.................           13            0  Fujitsu..............................  None.                       
--------------------------------------------------------------------------------------------------------------------------------------------------------
*Estimate.                                                                                                                                              

Exhibit F

Debit Card Directory: The Complete Guide for the Debit Card 
Industry

Debit Card Directory; Chapter 6

ATM Owners

    Who owns all those automated-teller machines one sees popping up 
all over the place? Chances are, the answer is among this ranking of 
the top 300 ATM owners in the United States, listed by machines 
owned as of year-end 1992.
    These machine owners control some 47,910 terminals, or 55% of 
all ATMs. Not all significant ATM deployers are banks. Among the 
ranks of machine owners are six non-bank companies: Electronic Data 
Systems, Affiliated Computer Systems, Wegmans Food Markets, FIserv, 
Publix Super Markets, and Delchamps supermarkets.
    Each entry also records how many POS terminals the organization 
owns. As it happens, the top 300 ATM owners also control 58,100, or 
54%, of all U.S. POS devices.
    [Pages irreproducible. Pages are pp. 144-153 of Debit Card 
Directory: The Complete Guide for the Debit Card Industry in the 
United States (Faulkner & Gray) 1994 Edition. Copies are on file 
with the United States District Court for the District of Delaware 
and the Antitrust Division of the United States Department of 
Justice.]

Exhibit G

    [Pages irreproducible. Pages are from The Nilson Report, June 
1993. Copies are on file with the United States District Court for 
the District of Delaware and the Antitrust Division of the United 
States Department of Justice.]

Exhibit H

    [Page irreproducible. Page is p. 207 of Card Industry Directory: 
The Blue Book of the Credit and Debit Card Industry in the United 
States (Faulkner & Gray). Copies are on file with the United States 
District Court for the District of Delaware and the Antitrust 
Division of the United States Department of Justice.]

Exhibit I

Debit Card Directory; Chapter 3

EFT Networks

    Of course, there is more to debit cards than POS--and the shared 
regional networks offer it. Here are many of the same networks from 
Chapter Two, now ranked according to total transaction volume for 
September 1993. This ranking thus includes automated-teller 
transactions as well as payments at the point of sale, with data on 
terminals by type--ATM or POS, including how many ATMS are installed 
off bank premises in stores, malls, etc.--and a breakdown of 
transactions into those on ATMs and those on POS terminals. This 
information is shown for the 50 largest shared regional systems.
    Now the value of shared network brands becomes clear. The top-
line total-transaction number includes all transactions deposits, 
withdrawals, transfers, payments, and balance inquiries) performed 
on machines hooked into the network not just those passing through 
the network's data center. Hence, the number captures a truer sense 
of the strength of the network's brand among cardholders than does 
the number of data-center transactions (which are shown in the 
``switch'' line in the transaction analysis).
    Another such indicator is the interchange percentage, shown in 
the transaction analysis. This is the portion of total volume 
stemming from cardholders' use of terminals belonging to banks other 
than their own. Banks' fees for so-called foreign transactions 
influence interchange, of course, but the number does give some 
indication of the extent to which consumers recognize network marks.
    Networks to watch include number-one Star and second-ranked MAC. 
Star in 1993 became the first network ever to exceed the 100-million 
mark in monthly volume. And MAC, which is part of the giant 
Electronic Payment Services Inc. electronic banking combine, logged 
the fastest growth among the top 50, boosting transactions by 78%. 
This surge was enough to move the network up from its fourth-place 
showing in 1992.

    [Page irreproducible. Page is p. 34 of Debit Card Directory: The 
Complete Guide for the Debit Card Industry in the United States 
(Faulkner & Gray) 1994 Edition. Copies are on file with the United 
States District Court for the District of Delaware and the Antitrust 
Division of the United States Department of Justice.]

Exhibit J

Debit Card Directory; Chapter 2

POS Networks

    When banks began hooking up their automated teller machines to 
regional electronic-banking networks back in the 1970s, the eventual 
use of debit cards to buy things in stores was always uppermost in 
the minds of bank and network managers alike.
    That next step began in the early '80s. One of the first 
networks to introduce point-of-sale debit was Iowa's Shazam. In 
1985, California's major banks created Interlink, skipping the ATM 
stage altogether and going straight to POS.
    Now at least 25 networks offer POS, and the brand identity, 
single card bases, and machine-sharing these regional systems bring 
to the product are helping fuel its remarkable growth.
    This is producing some notable success stories among the 
networks. The New Jersey-based NYCE network, whose POS program 
barely existed two years ago, is installing thousands of terminals a 
month in supermarkets and other retail locations. Result: a nearly 
600% increase in monthly transactions in one year.
    These 25 networks offering POS, along with Maestro, MasterCard's 
national POS brand, are ranked here by transaction volume for June 
1993, with details on each system's transactions, terminals, switch 
fees, cards, and merchant concentration. Interlink, with its massive 
programs with such merchants as Lucky and Arco, ranks number one, 
dwarfing second-ranked Explore, another California network. NYCE's 
big growth was enough to boost the network into the number 10 spot.
    Look for network mergers to thin these ranks, leading to perhaps 
10 or so super-regional systems by the end of the decade. Fewer 
brands covering more cards, terminals, and territory should mean 
accelerated growth for POS.

    [Page irreproducible. Page is p. 26 of Debit Card Directory: The 
Complete Guide for the Debit Card Industry in the United States 
(Faulkner & Gray) 1994 Edition. Copies are on file with the United 
States District Court for the District of Delaware and the Antitrust 
Division of the United States Department of Justice.]

[FR Doc. 94-21236 Filed 8-29-94; 8:45 am]
BILLING CODE 4410-01-M