[Federal Register Volume 69, Number 27 (Tuesday, February 10, 2004)]
[Notices]
[Pages 6325-6339]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-2688]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. First Data Corporation and Concord EFS, Inc.; 
Competitive Impact Statement, Proposed Final Judgment and Complaint

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. section 16(b) through (h), that a proposed 
Final Judgment, Amended Hold Separate Stipulation and Order, and 
Competitive Impact Statement have been filed with the United States 
District Court for the District of Columbia in United States of America 
v. First Data Corporation and Concord EFS, Inc., Civil Action No. 
03CV02169. On October 23, 2003, the United States filed a Complaint 
alleging that the proposed acquisition by First Data of Concord would 
violate Section 7 of the Clayton Act, 15 U.S.C. 18. The Complaint 
alleges that the acquisition would reduce competition substantially in 
the PIN debit network services market by combining Concord's STAR PIN 
debit network with the NYCE PIN debit network. First Data owns a 
controlling 64 percent interest in NYCE. The proposed Final Judgment 
requires

[[Page 6326]]

First Data to divest all of its interests in NYCE. Copies of the 
Complaint, proposed Final Judgment, Amended Hold Separate Stipulation 
and Order, and Competitive Impact Statement are available for 
inspection at the Department of Justice in Washington, DC, in Room 
9500, 600 E Street, NW. and at the Office of the Clerk of the United 
States District Court for the District of Columbia, Washington, DC.
    Public comment is invited within 60 days of the date of this 
notice. Such comments, and responses thereto, will be published in the 
Federal Register and filed with the Court. Comments should be directed 
to Renata Hesse, Chief, Networks and Technology Section, Antitrust 
Division, Department of Justice, Suite 9500, 600 E Street, NW., 
Washington, DC 20530, (telephone: 202-307-6200).

J. Robert Kramer, II,
Director of Operations, Antitrust Division.

Competitive Impact Statement

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

I. Nature and Purpose of the Proceeding

    Defendant first Data Corporation (``First Data'') and Defendant 
Concord EFS, Inc. (``Concord'') entered into an Agreement and Plan of 
Merger on April 1, 2003, pursuant to which First Data would acquire 
Concord in an all-stock transaction then valued at approximately $7 
billion. On October 23, 2003, the United States and the States of 
Connecticut, Illinois, Louisiana, Massachusetts, New York, Ohio, 
Pennsylvania and Texas, and the District of Columbia (``Plaintiff 
States'') filed a civil antitrust complaint, seeking to enjoin the 
proposed acquisition. The Complaint alleges that the acquisition would 
reduce competition substantially in the PIN debit network services 
market by combining the STAR and NYCE PIN debit networks, in violation 
of section 7 of the Clayton Act, 15 U.S.C. 18.
    PIN debit networks provide a fast and secure payment mechanism that 
is used at more than one million merchant locations. The acquisition 
would have significantly increased the concentration levels in the 
already concentrated PIN debit network services market by combining the 
largest and third-largest PIN debit networks in the United States, STAR 
and NYCE, respectively. This significant increase in market 
concentration would likely have substantially reduced competition among 
PIN debit networks for merchant customers, resulting in thousands of 
merchants paying higher prices and receiving poorer levels of service 
for PIN debit network services. Merchants would have passed on at least 
some of these higher costs by raising the prices of their goods and 
services, to the detriment of tens of millions of consumers throughout 
the United States. Accordingly, the complaint sought: (1) a judgment 
that the proposed acquisition would violate Section 7 of the Clayton 
Act; and (2) permanent injunctive relief that would prevent Defendants 
from carrying out the acquisition or otherwise combining their 
businesses or assets.
    On December 15, 2003, the United States, the Plaintiff States and 
the Defendants filed a proposed Final Judgment and Hold Separate 
Stipulation and Order, which will eliminate the anticompetitive effects 
of the acquisition. Upon the filing of the proposed Final Judgment and 
Hold Separate Stipulation and Order, the Defendants announced that they 
had extended the date for closing the transaction until April 30, 2004. 
On January 9, 2004, the parties filed an Amended Hold Separate 
Stipulation and Order.\1\
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    \1\ The original Hold Separate Stipulation and Order signed by 
the Court on December 15, 2003 prohibited any first Data officer, 
director, manager, employee, or agent from serving on the NYCE Board 
of Directors after December 30, 2003. This deadline would have 
required six First Data employees who were serving on the NYCE Board 
to resign. On December 30, 2003, with the consent of all parties, 
the Court issued an order extending First Data's deadline concerning 
participation on the NYCE Board until January 9, 2004. On January 9, 
the parties filed a consent motion requesting that the Court enter 
the Amended Hold Separate Stipulation and Order, which the Court 
signed on January 13, 2004. The Amended Hold Separate Stipulation 
and Order allows First Data to retain its NYCE Board seats for 
certain limited specifically enumerated purposes unless the United 
States, in its sole discretion, in consultation with the Plaintiff 
States, requires First Data's representatives on the NYCE Board to 
resign.
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    The proposed Final Judgment requires First Data, within 150 
calendar days after the Court's signing of the original Hold Separate 
Stipulation and Order, or five days after notice of the entry of this 
Final Judgment by the Court, whichever is later, to divest all of its 
governance rights in NYCE and its entire 64 percent ownership interest 
in NYCE (collectively ``NYCE Holdings'').\2\ The requirement that First 
Data divest NYCE is equivalent to the relief the United States would 
likely have obtained had it prevailed at trial.
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    \2\ The term ``NYCE Holdings'' is defined at ]II.G of the Final 
Judgment.
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    The terms of the Amended Hold Separate Stipulation and Order 
require First Data to take certain steps to ensure that NYCE is 
operated as a competitively independent, economically viable and 
ongoing business concern, that will remain independent and uninfluenced 
by the consummation of the acquisition, and that competition is 
maintained during the pendency of the ordered divestiture.
    The United States, the Plaintiff States and the Defendants have 
stipulated that the proposed Final Judgment may be entered after 
compliance with the APPA. Entry of the proposed Final Judgment would 
terminate this action, except that the Court would retain jurisdiction 
to construe, modify or enforce the provisions of the proposed Final 
Judgment and to punish violations thereof.

II. Description of the Events Giving Rise to the Alleged Violation

A. The Defendants and the Proposed Transaction

    First Data is a Delaware corporation headquartered in Greenwood 
Village, Colorado. In 2002, First Data reported total worldwide 
revenues of $7.6 billion. First Data owns 64 percent of NYCE, which 
operates the third largest PIN debit network. Citicorp, J.P. Morgan 
Chase & Co., FleetBoston Financial and HSBC USA Inc. own the remaining 
36 percent of NYCE. First Data also owns substantial merchant and card 
issuing processing operations, as well as Western Union, the leading 
provider of consumer-to-consumer money transfer services.
    Concord is a Delaware corporation headquartered in Memphis, 
Tennessee. Concord's revenues in 2002 totaled nearly $2 billion. 
Concord operates STAR, the largest PIN debit network. STAR is comprised 
of a number of PIN debit networks that Concord acquired over the last 
several years. Concord brought MAC in 1999, Cash Station in 2000, and 
then STAR in 2001, merging it with the MAC network. Shortly before 
Concord acquired STAR, STAR bought the HONOR network, which had 
recently acquired the MOST network. Concord also is a leading merchant 
processor and provides an array of services to debit card issuers and 
ATM owners.
    First Data and Concord executed a merger agreement on April 1, 
2003. Under that agreement, First Data would acquire Concord through an 
all-stock transaction.

[[Page 6327]]

B. Product Market: PIN Debit Network Services

    The Complaint alleges that PIN debit network services is a line of 
commerce and a relevant antitrust product market within the meaning of 
section 7 of the Clayton Act, 15 U.S.C. Sec. 18. During the 1970s, bank 
consortiums formed numerous regional electronic funds transfer 
(``EFT'') networks to enable their customers to withdraw funds from 
ATMs owned by multiple banks. EFT networks were first used for PIN 
debit transactions in the early 1980s. It was not until the mid-1990s, 
however, that PIN debit transactions became a popular method of payment 
for consumers to purchase goods and services at retail stores. PIN 
debit transaction volume grew substantially over the past five years 
due to merchant and consumer recognition of the advantages of PIN debit 
as a form of payment. Today, consumers make over 500 million PIN debit 
transactions every month.
    A PIN debit network provides the telecommunications and payments 
infrastructure that connects a network's participating financial 
institutions with merchant locations throughout the United States. A 
PIN debit network also performs a number of related functions necessary 
for the efficient operation of the network. For example, PIN debit 
networks: (1) Promote their brand names among consumers, merchants and 
financial institutions; (2) establish rules and standards to govern 
their networks; and (3) set fees and assessments for use of the 
network's products and services.
    To execute a PIN debit transaction, a customer swipes a debit card 
at a point-of-sale terminal and enters a PIN on a numeric keypad. After 
the PIN is entered, the transaction and card information is sent over 
the PIN debit network to the card-issuing financial institution for 
authorization. The financial institution sends an electronic message to 
the PIN debit network, accepting or rejecting the transaction. The PIN 
debit network switches this reply back to the merchant to complete the 
transaction. The entire process takes place electronically in several 
seconds.
    PIN debit networks charge both the merchant and the card-issuing 
financial institution a per transaction ``switch'' fee for the 
network's routing services. PIN debit networks also set an 
``interchange'' fee. The interchange fee is paid by the merchant to the 
PIN debit network and then passed through to the card-issuing financial 
institution. Generally, the merchant's total charge from the PIN debit 
networks for each transaction is the switch fee plus the interchange 
fee.
    As stated, the Complaint alleges that PIN debit network services is 
a relevant antitrust product market. A hypothetical monopolist could 
profitably impose a small but significant and nontransitory increase in 
the price (``SSNIP'') of all PIN debit network services. Merchants 
would not defeat a SSNIP for PIN debit network services by requiring or 
encouraging their customers to switch to other payment methods, 
including signature debit network services. In particular, PIN debit 
networks offer a number of substantial advantages to consumers and 
merchants that distinguish them from signature debit networks. PIN 
debit networks are generally significantly less expensive to merchants 
than signature debit networks. PIN debit networks also often provide a 
more secure method of payment than signature debit networks because it 
is easier to forge a person's signature than to obtain an individual's 
PIN. Because of the increased security of PIN debit network services, 
there is no need for the charge-back procedures that allow consumers to 
challenge signature debit transactions, thereby saving merchants 
additional time and money. PIN debit transactions also generally settle 
more quickly than signature debit transactions. Finally, PIN debit 
networks often allow for faster execution at the point of sale than 
signature debit networks.
    Merchants also would not defeat a SSNIP for PIN debit network 
services because significant numbers of consumers prefer to use PIN 
debit transactions over other forms of payment, particularly at 
supermarkets, mass merchandisers and drug stores. Many consumers value 
the security and speed of PIN debit transactions, as well as the ``cash 
back'' feature that allows them to receive cash at the register when 
making a purchase. Consumers cannot receive cash back when making a 
signature debit purchase. Today, consumers request cash back in 
approximately 20 percent of all PIN debit transactions. Consequently, 
many merchants would risk causing substantial customer backlash if they 
stopped offering or discouraged PIN debit transactions.

C. Geographic Market: United States

    While certain PIN debit networks are stronger in particular areas 
of the country, the largest networks, including STAR and NYCE, are 
accepted at many merchant locations throughout the United States. 
Accordingly, the United States is a relevant geographic market for the 
provision of PIN debit network services within the meaning of section 7 
of the Clayton Act, 15 U.S.C. 18.

D. Harm to Competition in the PIN Debit Network Services Market

    The Complaint alleges the First Data's acquisition of Concord is 
likely to substantially reduce competition in the PIN debit network 
services market by combining the largest and third-largest PIN debit 
networks, STAR and NYCE. The loss of this significant competition would 
have caused higher prices and reduced levels of service to merchants 
and consumers. The PIN debit network services market is already very 
concentrated. As of March 2003, STAR routed approximately 56 percent of 
all PIN debit transactions, while Interlink and NYCE accounted for 
approximately 15 percent and 10 percent of the PIN debit market, 
respectively. Although recent contract losses may reduce STAR's market 
share (and increase Interlink's), under the most conservative 
estimates, STAR will remain the largest PIN debit network in the United 
States, with at least a 35 percent market share. Thus, if the 
transaction were completed, the combined STAR/NYCE network would be the 
largest PIN debit network, with at least a 45 percent market share. 
Together, the combined STAR/NYCE network and Interlink would form a 
near duopoly, accounting for more than 80 percent of all PIN debit 
transactions.
    This highly concentrated market structure would have enabled PIN 
debit networks to increase prices and reduce levels of service to 
merchant customers. PIN debit networks compete for merchants' business 
by convincing merchants to accept their networks and to route debit 
transactions to their networks when there is a choice of routing 
options. PIN debit networks also compete for merchants by improving 
their networks' transmission speed, limiting network down-time and 
reducing the number of improperly rejected transactions. Merchants' 
ability to choose which PIN debit networks to accept at their stores, 
and to control the routing of some PIN debit transactions, constrains 
the prices that merchants pay for PIN debit network services and helps 
to ensure high quality levels of service.
1. Merchant Threats To Drop PIN Debit Networks
    The Complaint alleges that combining STAR and NYCE would have 
harmed competition in the PIN debit network services market by reducing 
merchants' ability to drop either network. The PIN debit networks take 
merchants' threats to drop their networks seriously. The loss merchant 
customers can significantly reduce a PIN debit

[[Page 6328]]

network's profits. In addition to the lost switch fees from merchants, 
the loss of merchant business can make a PIN debit network less 
attractive to its financial institution customers. PIN debit networks 
compete for financial institution members based in part on the number 
of merchants that accept their networks.
    Merchant have prevented or reduced some large price increased from 
STAR, NYCE and interlink by credibly threatening to discontinue 
acceptance of the networks. During the past two years, STAR, NYCE and 
Interlink each reduced planned price increases by more than one third 
because of concerns that merchants would drop their networks. This 
reduction in the amount of the three leading networks' planned price 
increases resulted in more than $100 million in annual savings to 
merchant customers.
    Merchants' ability to drop a PIN debit network, or to credibly 
threaten to do so, depends on several factors, including: (1) A 
network's market share; and (2) the number of the network's PIN debit 
transactions that are routed over ``single-bugged'' debit cards. 
Generally, it is riskier for a merchant to drop a PIN debit network 
with a larger market share because of the increased likelihood of 
rejected transactions, delays at check-out lines, customer confusion 
and embarrassment, lost sales, and customers' use of more costly forms 
of payment for merchants. Dropping a PIN debit network with a large 
market share is particularly risky if many of the debit cards that can 
connect to that network are ``single-bugged'' with only that network. A 
single-bugged debit card can connect to only one PIN debit network. For 
example, some debit cards are single-bugged only with STAR. If a 
merchant does not accept STAR, then card holders with debit cards that 
are single-bugged only with STAR cannot execute a PIN debit transaction 
at that merchant. In contrast, if a debit card is bugged with STAR and 
other PIN debit networks, then a merchant's decision to drop STAR may 
not prevent the card holder from making PIN debit transactions at the 
merchant if the merchant accepts at least one of the other PIN debit 
networks on the debit card.
    Combining STAR and NYCE would have made it substantially more 
difficult for merchants to drop, or credibly threaten to drop STAR or 
NYCE, to prevent future price increases. The merged networks would have 
had a large combined market share of at least 45%, a significant 
increase over each network's current market share. In addition, 
combining STAR and NYCE would have increased substantially the number 
of STAR and NYCE PIN debit transactions executed with debit cards that 
were single-bugged.
2. Reduced Least-Cost Routing Opportunities
    The Complaint also alleges that combining STAR and NYCE would have 
reduced competition in the PIN debit network services market for 
merchant customers by limiting merchants' opportunities to route PIN 
debit transactions to the least expensive network (``least-cost 
routing''). Some large merchants, either directly or through their 
processors, always route PIN debit transactions to the least expensive 
PIN debit network when a debit card is bugged with multiple PIN debit 
networks. Other merchants and processors least-cost route when there 
are conflicts in the networks' routing rules. Conflicts occur when two 
networks both claim ``priority'' status for a particular debit card. 
For example, both STAR and NYCE may require merchants (or their 
processors) to route PIN debit transactions executed with a particular 
debit card over their networks. In such instances, some merchants (and 
processors) will route to the less expensive network.
    Least-cost routing opportunities constrain PIN debit networks from 
increasing prices to merchants, or reducing levels of service, because 
they permit merchants, in some circumstances, to route around more 
expensive networks, or networks that offer poorer levels of service. In 
recent years, major supermarkets and mass merchandisers have obtained 
superior prices and levels of service by routing, or threatening to 
route, transactions away from one PIN debit network to another network.
    Merchants currently have a substantial number of opportunities to 
least-cost route PIN debit transactions between STAR and NYCE. A large 
number of debit cards can connect to both STAR and NYCE. Further, STAR 
and NYCE's routing rules often conflict. The merger would have 
prevented merchants from obtaining lower prices and improved levels of 
service from STAR and NYCE by leveraging their ability to route PIN 
debit transactions away from STAR to NYCE, and vice versa.

E. Timely and Sufficient Entry Is Unlikely

    The Complaint alleges that, in the near future, entry or expansion 
into the PIN debit network services market is unlikely to defeat the 
anticompetitive price increases that the combination of STAR and NYCE 
would have caused. There has been virtually no new entry in the PIN 
debit network services market for more than five years. Entry and 
expansion are difficult because the market is characterized by 
substantial ``network effects.'' A network must attract a substantial 
number of financial institutions as members, while at the same time 
convince a large number of merchants to accept the network. Coordinated 
development of both financial institution members and merchant 
acceptance is critical because the utility of a particular PIN debit 
network to consumers, banks and merchants depends heavily on the 
breadth of its acceptance and use.
    In addition, most PIN debit networks have adopted rules and 
policies that increase the cost of expansion by a small network or 
entry by a new market participant. Most significantly, network routing 
rules that specify the routing of transactions executed with multi-
bugged cards sometimes can slow the degree to which a new PIN debit 
network can expand. Companies (such as First Data and Concord) that own 
both merchant processing operations and PIN debit networks also can 
make entry or expansion by PIN debit networks more difficult. When a 
PIN debit transaction is executed with a multi-bugged card, in some 
circumstances, merchant processors can determine which of the multiple 
PIN debit networks receives the transaction. Accordingly, companies 
that own both merchant processing operations and PIN debit networks may 
have some opportunities and incentives to favor their own PIN debit 
networks.

III. Explanation of the Proposed Final Judgment

    The proposed Final Judgment's requirement that First Data divest 
its NYCE Holdings will eliminate the anticompetitive effects in the PIN 
debit network services market that the transaction would have produced. 
First Data's divestiture of its NYCE Holdings will prevent the 
combination of STAR and NYCE, the combination of First Data and 
Concord's assets that would have violated section 7 of the Clayton Act. 
By preventing the combination of STAR and NYCE, the proposed Final 
Judgment will ensure that merchants retain their current ability to 
obtain competitive prices and levels of service from the two networks, 
either by: (1) Dropping, or credibly threatening to drop, STAR and/or 
NYCE; or (2) taking advantage of least-cost routing opportunities 
between the two networks.

[[Page 6329]]

    The proposed Final Judgment requires First Data, within 150 
calendar days after the Court's signing of the original Hold Separate 
Stipulation and Order,\3\ or five days after notice of the entry of the 
Final Judgment by the Court, whichever is later, to divest all of its 
NYCE Holdings. Final Judgment ] IV.A. Again, the NYCE Holdings consist 
of all of First Data's governance rights in NYCE, and First Data's 
entire 64 percent ownership interest in NYCE, including all tangible 
assets. Final Judgment ] II.G. The United States agreed to allow First 
Data 150 days to divest its NYCE holdings, rather than the 120-day time 
period typically required for divestitures to remedy Section 7 
violations, because NYCE's minority shareholders, by contract, have 30 
days to match any third-party offer to purchase First Data's interests 
in NYCE. Had the United States not agreed to the additional 30-day 
divestiture period, First Data effectively would have had only 90 days 
to find a buyer for its NYCE holdings.
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    \3\ The Court signed the original Hold Separate Stipulation and 
Order on December 15, 2003.
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    In addition to divesting its NYCE Holdings, the proposed Final 
Judgment requires First Data to provide certain guarantees to the buyer 
of the NYCE holdings, including warranting that: (1) Each asset therein 
that was operational as of the date of filing of the Complaint will be 
operational on the date of the divestiture; and (2) there are no 
material defects in the environmental, zoning or other permits 
pertaining to the operation of NYCE. Final Judgment ]] IV.E and G.
    The United States, in its sole discretion, after consultation with 
the Plaintiff States, may agree to one or more extensions of this time 
period, not to exceed in total 90 calendar days. Final Judgment ] IV.A. 
The NYCE Holdings must be divest in such a way as to satisfy the United 
States in its sole discretion, after consultation with the Plaintiff 
States, that NYCE can and will be operated by the purchaser as a 
viable, ongoing business that can compete effectively in the relevant 
market. Final Judgment ]] IV.A and H. First Data must take all 
reasonable steps necessary to accomplish the divestiture quickly and 
shall cooperate with prospective acquirers.
    If First Data does not accomplish the ordered divestiture within 
the prescribed time period, the United States will nominate, and the 
Court will appoint, a trustee to assume sole power and authority to 
complete the divestiture. Final Judgment ] V.A. If a trustee is 
appointed, the proposed Final Judgment provides that First Data will 
pay all costs and expenses of the trustee. Final Judgment ]] V.B and D. 
The trustee's commission will be structured so as to provide an 
incentive for the trustee based on the price obtained and the speed 
with which the divestiture is accomplished. After his or her 
appointment becomes effective, the trustee will file monthly reports 
with the Court, the United States and the Plaintiff States, setting 
forth his or her efforts to accomplish the divestiture. Final Judgment 
] V.F. If First Data has not divested its NYCE Holdings at the end of 
six months, the United States and the Plaintiff States will make 
recommendations to the Court, which shall enter such orders as 
appropriate, in order to carry out the purpose of the trust, including 
extending the trust or the term of the trustee's appointment. Final 
Judgment ] V.G. Defendants must cooperate fully with the trustee's 
efforts to divest First Data's NYCE Holdings to an acquirer acceptable 
to the United States. Final Judgment ] V.E.
    The proposed Final Judgment filed in this case is meant to ensure 
the prompt divestiture by First Data of its NYCE Holdings. The purpose 
of the divestiture is to ensure the maintenance of a viable PIN debit 
network competitor capable of competing effectively to provide PIN 
debit network services and to remedy the anticompetitive effects that 
the United States and the Plaintiff States allege would otherwise 
result from First Data's acquisition of Concord. See Final Judgment ] 
V.H.
    The Amendment Hold Separate Stipulation and Order will ensure that 
NYCE is maintained and operated as an independent competing PIN debit 
network until First Data divests all of its NYCE Holdings. The Order, 
except when necessary to carry out First Data's obligations under the 
Order, bars First Data from: (1) Serving as an officer, manager, or 
employee, or in a comparable position with or for NYCE; (2) exercising 
any authority through its representatives on the NYCE Board of 
Directors, except for limited specifically enumerated actions; (3) 
participating in, attending, or receiving any notes, minutes, or 
agendas of, information from, or any documents distributed in 
connection with, any nonpublic meeting of NYCE's Board of Directors or 
any committee thereof; and (4) voting or permitting to be voted First 
Data's NYCE shares. Amended Hold Separate Stipulation and Order ]] V.1 
through V.3. In addition, the Order prevents First Data from 
communicating to or receiving from any officer, director, manager, 
employee, or agent of NYCE any nonpublic information regarding any 
aspect of NYCE's business. Amended Hold Separate Stipulation and Order 
] V.4. The Order also allows the United States, in its sole discretion, 
in consultation with the Plaintiff States, to require all of First 
Data's representatives on the NYCE board to resign. If the United 
States exercises its discretion to require First Data's NYCE directors 
to resign, First Data may only nominate individuals to fill the vacant 
NYCE Board seats who are officers or managers of NYCE or a minority 
shareholder of NYCE. Amended Hold Separate Stipulation and Order ] V.1.

IV. Remedies Available to Potential Private Litigants

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

V. Procedures Available for Modification of the Proposed Final Judgment

    The United States, the Plaintiff States and the Defendants have 
stipulated that the proposed Final Judgment may be entered in the Court 
after compliance with the provisions of the APPA, provided that the 
United States has not withdrawn its consent. The APPA conditions entry 
upon the Court's determination that the proposed Final Judgment is in 
the public interest. 15 U.S.C. 16(e).
    The APPA provides a period of at least 60 days preceding the 
effective date of the proposed Final Judgment within which any person 
may submit to the United States written comments regarding the proposed 
Final Judgment. 15 U.S.C. 16(b&d). Any person who wishes to comment 
should do so within 60 days of the date of publication of this 
Competitive Impact Statement in the Federal Register. The United States 
will evaluate and respond to the comments. All comments will be give 
due consideration by the United States which remains free to withdraw 
its consent to the proposed Final Judgment at any time prior to entry. 
The comments and the response of the United States will be filed with 
the

[[Page 6330]]

Court and published in the Federal Register.
    Written comments should be submitted to: Renata B. Hesse, Chief, 
Networks & Technology Section, Antitrust Division, United States 
Department of Justice, 600 E Street, NW., Suite 9500, Washington, DC 
20530.
    The proposed Final Judgment provides that the Court retains 
jurisdiction over this action and the parties may apply to the Court 
for any order necessary or appropriate for the modification, 
interpretation or enforcement of the Final Judgment.

VI. Alternatives to the Proposed Final Judgment

    The United States considered as an alternative to the proposed 
Final Judgment a full trial on the merits against the Defendants. The 
United States could have continued the litigation and sought permanent 
injunctive relief against First Data's acquisition of Concord. The 
United States is satisfied, however, that the divestiture of all of 
First Data's interests in NYCE to an independent third party will 
achieve all of the relief the United States would have obtained through 
litigation and will preserve competition for the provision of PIN debit 
network services in the United States.

VII. Standard of Review Under the APPA for the Proposed Final Judgment

    The APPA requires that proposed consent judgments in antitrust 
cases brought by the United States be subject to a 60-day comment 
period, after which the Court shall determine whether entry of the 
proposed Final Judgment ``is in the public interest.'' 15 U.S.C. 16(e). 
In making the determination, the Court may consider:

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

Id. The United States Court of Appeals for the District of Columbia 
Circuit has held that the statute permits a court to consider, among 
other things, the relationship between the remedy secured and the 
specific allegations set forth in the government's complaint, whether 
the decree is sufficiently clear, whether enforcement mechanisms are 
sufficient, and whether the decree may positively harm third parties. 
United States v. Microsoft Corp., 56 F.3d 1448, 1458-62 (D.C. Cir. 
1995).
    In conducting this inquiry, ``[t]he Court is nowhere compelled to 
go to trial or to engage in extended proceedings which might have the 
effect of vitiating the benefits of prompt and less costly settlement 
through the consent decree process.'' 119 Cong. Rec. 24,598 (1973) 
(statement of Senator Tunney.) \4\ Rather:
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    \4\ See also United States v. Gillette Co., 406 F. Supp. 713, 
716 (D. Mass. 1975) (recognizing it was not the court's duty to 
settle; rather, the court must only answer ``whether the settlement 
achieved [was] within the reaches of the public interest''). A 
``public interest'' determination can be made properly on the basis 
of the Competitive Impact Statement and Response to Comments filed 
pursuant to the APPA. Although the APPA authorizes the use of 
additional procedures, 15 U.S.C. Sec. 16(f), those procedures are 
discretionary. A court need not invoke any of them unless it 
believes that the comments have raised significant issues that 
further proceedings would aid the court in resolving those issues. 
See H.R. Rep. No. 93-1463, 93rd Cong., 2d Sess. 8-9 (1974), 
reprinted in 1974 U.S.C.C.A.N. 6535, 6538.

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

United States v. Mid-America Dairymen, Inc., 1977 WL 4532, 1977-1 Trade 
Cas. (CCH) ] 61,508, at 71,980 (W.D. Mo. May 17, 1977).
    With respect to the adequacy of the relief secured by the decree, a 
court may not ``engage in an unrestricted evaluation of what relief 
would best serve the public.'' United States v. BNS, Inc., 858 F.2d 
456, 462 (9th Cir. 1988) (citing United States v. Bechtel Corp., 648 
F.2d 660, 666 (9th Cir. 1981)); see also Microsoft, 56 F.3d at 1460-62. 
Rather, the case law requires that:

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

Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\5\
---------------------------------------------------------------------------

    \5\ Cf. BNS, 858 F.2d at 464 (holding that the court's 
``ultimate authority under the [APPA] is limited to approving or 
disapproving the consent decree)''; Gillette, 406 F. Supp. at 716 
(noting that, in this way, the court is constrained to ``look at the 
overall picture not hypercritically, nor with a microscope, but with 
an artist's reducing glass''). See generally Microsoft, 56 F.3d at 
1461 (discussing whether ``the remedies [obtained in the decree are] 
so inconsonant with the allegations charged as to fall outside of 
the `reaches of the public interest''').
---------------------------------------------------------------------------

    The proposed Final Judgment, should not be reviewed under a 
standard of whether it is certain to eliminate every anticompetitive 
effect of a particular practice or whether it mandates certainty of 
free competition in the future. Court approval of a final judgment 
requires a standard more flexible and less strict than the standard for 
a finding of liability. ``[A] proposed decree must be approved even if 
it falls short of the remedy the court would impose on its own, as long 
as it falls within the range of acceptability or is `within the reaches 
of public interest.''' United States v. American Tel. & Tel. Co., 552 
F. Supp. 131, 151 (D.D.C. 1982) (quoting Gillette, 406 F. Supp. at 
716), aff'd sub nom., Maryland v. United States, 460 U.S. 1001 (1983). 
See also United States v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 
(W.D. Ky. 1985) (approving the consent decree even though the court 
would have imposed a greater remedy).
    Moreover, the Court's role under the APPA is limited to reviewing 
the remedy in relationship to the violations that the United States has 
alleged in its Complaint, and does not authorize the Court to 
``construct [its] own hypothetical case and then evaluate the decree 
against that case.'' Microsoft, 56 F.3d at 1459. Because the ``court's 
authority to review the decree depends entirely on the government's 
exercising its prosecutorial discretion by bringing a case in the first 
place,'' it follows that ``the court is only authorized to review the 
decree itself,'' and not to ``effectively redraft the complaint'' to 
inquire into other matters that the United States might have but did 
not pursue. Id. at 1459-60.

VIII. Determinative Documents

    There are no determinative materials or documents within the 
meaning of the APPA that were considered by the United States in 
formulating the proposed Final Judgment.

    Dated: January----, 2004

Respectfully submitted,

For Plaintiff United States:

Joshua H. Soven, Esq.,

Antitrust Division, U.S. Department of Justice, 600 E Street, NW., 
Suite 9500, Washington, DC 20530.

[[Page 6331]]

Final Judgment

    Whereas, plaintiff United States of America (``United States''), 
the District of Columbia, and the States of Connecticut, Illinois, 
Louisiana, Massachusetts, New York, Ohio, Pennsylvania, and Texas 
(``plaintiff states''), filed their Complaint on October 23, 2003, and 
the United States, plaintiff states, and defendants, First Data 
Corporation and Concord EFS, Inc., by their respective attorneys, have 
consented to the entry of this Final Judgment without trial:
    And whereas, this Final Judgment does not constitute any evidence 
against or admission by any party, regarding any issue of fact or law;
    And whereas, defendants agree to be bound by the provisions of this 
Final Judgment pending its approval by the Court;
    And whereas, the essence of this Final Judgment is the prompt and 
certain divestiture of certain rights or assets by First Data to assure 
that competition is not substantially lessened;
    And whereas, the United States and plaintiff states require First 
Data to make a certain divestiture for the purpose of remedying the 
loss of competition alleged in the Complaint;
    And whereas, defendants have represented to the United States and 
plaintiff states that the divestiture required below can and will be 
made and that defendants will later raise no claim of hardship or 
difficulty as grounds for asking the Court to modify any of the 
divestiture provisions contained below;
    Now therefore, without trial and upon consent of the parties, it is 
ordered, adjudged and decreed:

I. Jurisdiction

    This Court has jurisdiction over the subject matter of and each of 
the parties to this action. The Complaint states a claim upon which 
relief may be granted against defendants under section 7 of the Clayton 
Act, as amended, 15 U.S.C. 18.

II. Definitions

    As used in this Final Judgment:
    A. ``Acquirer'' means the entity or entities to whom defendant 
First Data divests NYCE Holdings.
    B. ``Concord'' means Concord EFS, Inc., a Delaware corporation 
headquartered in Memphis, Tennessee, and its successors and assigns, 
its subsidiaries, divisions, groups, affiliates, partnerships, and 
joint ventures, and their directors, officers, managers, agents, and 
employees.
    C. ``EFT network services'' means the provision to financial 
institutions and retailers of shared electronic fund transfer network 
services for automatic teller machine (ATM) transactions, online and 
offline debit point-of-sale (POS) transactions, electronic benefits 
transfer, and point-of-banking transactions.
    D. ``EFT processing services'' means the provision to financial 
institutions of real-time processing services that support ATM driving 
and fully-automated monitoring services, gateway access, and debit card 
issuance and authorization solutions.
    E. ``First Data'' means First Data Corporation, a Delaware 
corporation headquartered in Greenwood Village, Colorado, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships, and joint ventures (excluding those entities 
not controlled by First Data), and their directors, officers, managers, 
agents, and employees.
    F.``NYCE'' means NYCE Corporation, a Delaware corporation 
headquartered in Montvale, New Jersey, and its successors and assigns, 
its subsidiaries, divisions, groups, affiliates, partnerships, and 
joint ventures (excluding those entities not controlled by NYCE), and 
their directors, officers, managers, agents, and employees. NYCE 
includes its EFT network service business (the NYCE Network) and its 
EFT processing services business.
    G. ``NYCE Holdings'' means, unless otherwise noted, all of First 
Data's governance rights in NYCE, and First Data's entire 64 percent 
ownership interest in NYCE, including all of NYCE's rights, titles, and 
interests in the following:
    1. all tangible assets of NYCE, including facilities and real 
property; data centers; assets used for research, development, 
engineering or other support to NYCE, and any real property associated 
with those assets; manufacturing and sales assets relating to NYCE, 
including captial equipment, vehicles, supplies, personal property, 
inventory, office furniture, fixed assets and fixtures, materials, on- 
or off-site warehouses or storage facilities, and other tangible 
property or improvements; all licenses, permits and authorizations 
issued by any governmental organization relating to NYCE; all 
contracts, joint ventures, agreements, leases, commitments, and 
understandings pertaining to the operation of NYCE; supply agreements; 
all customer lists, accounts, and credit records; and other records 
maintained by NYCE in connection with its operations; and
    2. the intangible assets of NYCE, including all patents, licenses 
and sublicenses, intellectual property, copyrights, trademarks, 
computer software and related documentation, trade names, service 
marks, ``bugs,'' services names, technical information, know-how, trade 
secrets, drawings, blueprints, designs, design protocols, 
specifications for materials, specifications for parts and devices, 
data and results concerning historical and current research and 
development, quality assurance and control procedures, design tools and 
simulation capability, and all manuals and technical information NYCE 
provides to its employees, customers, suppliers, agents or licensees in 
connection with the NYCE's operations.
    H. ``Online debit'' means PIN debit.
    I. ``PIN'' means a Personal Identification Number.
    J. ``PIN debit'' means a method of electronic card payment by which 
consumers purchase goods and services form merchants by swiping a bank 
card at a point-of-sale terminal and entering a PIN on a numeric 
keypad, upon which the purchase amount is debited from the customer's 
bank account and transferred to the retailer's bank.
    K. ``PIN debit network'' Means a telecommunications and payment 
infrastructure that enables PIN debit transactions by providing the 
switch that connects merchants to consumers' demand deposit accounts at 
banks.
    L. ``PIN debit network services'' means the PIN debit network and 
its performance of those related functions necessary for the efficient 
operation of the network, including promotion of brand names among 
consumers, merchants, and banks; establishment of rules and standards 
to govern the networks; and the setting of fees.

III. Applicability

    A. This Final Judgment applies to First Data and Concord, as 
defined above, and all other persons in active concert or participation 
with any of them who receive actual notice of this Final Judgment by 
personal service or otherwise.
    B. Defendants shall require, as a condition of the sale or other 
disposition of all or substantially all of their assets or of lesser 
business units that include NYCE, that the purchaser agrees to be bound 
by the provision of this Final Judgment.

IV. Divestiture

    A. Defendant First Data is ordered and directed, within one hundred 
fifty (150) calendar days after the Court's signing of the Hold 
Separate Stipulation and Order in this matter, or five (5) days after 
notice of the entry of this Final

[[Page 6332]]

Judgment by the Court, whichever is later, to divest NYCE Holdings in a 
manner consistent with this Final Judgment to an Acquireer acceptable 
to the United States in its sole discretion, after consultation with 
plaintiff states. The United States, in its sole discretion, after 
consultation with plaintiff states, may agree to one or more extensions 
of this time period, not to exceed in total ninety (90) calendar days, 
and shall notify the Court in each such circumstance. Defendant First 
Data agrees to use its best efforts to divest NYCE Holdings as 
expeditiously as possible.
    B. In accomplishing the divestiture ordered by this Final Judgment, 
defendant First Data promptly shall make known, by usual and customary 
means, the availability of NYCE Holdings. Defendants shall inform any 
person making inquiry regarding a possible purchase of NYCE Holdings 
that it will be divested pursuant to this Final Judgment and provide 
that person with a copy of this Final Judgment. Defendant First Data 
shall offer to furnish to all prospective Acquirers, subject to 
customary confidentiality assurances, all information and documents 
relating to NYCE customarily provided in a due diligence process except 
such information or documents subject to the attorney-client or work-
product privilege. Defendant First Data shall make available such 
information to the United States and plaintiff states at the same time 
that such information is made available to any other person.
    C. Defendant First Data shall provide perspective Acquirers of NYCE 
Holdings, the United States, and plaintiff states information relating 
to the personnel involved in the production, operation, research, 
development, and sales at NYCE to enable the Acquirer to make offers of 
employment. Defendants will not interfere with any negotiations by the 
Acquirer to employ any of NYCE's employees whose responsibilities 
includes the production, operation, development, or sale of the 
products and services of NYCE.
    D. Defendant First Data shall permit prospective Acquirers of NYCE 
Holdings to have reasonable access to personnel and to make inspections 
of the physical facilities of NYCE; access to any and all 
environmental, zoning, and other permit documents and information; and 
access to any and all financial, operational, or other documents and 
information customarily provided as part of a due diligence process.
    E. Defendant First Data shall warrant to the Acquirer of NYCE 
Holdings that each asset therein that was operational as of the date of 
filing to the Complaint in this matter will be operational on the date 
of divestiture.
    F. Defendants shall not take any action that will impede in any way 
the permitting, operation, or divestiture of NYCE or NYCE Holdings.
    G. Defendant First Data shall warrant to the Acquirer of NYCE 
Holdings that there are no material defects in the environmental, 
zoning, or other permits pertaining to the operation of NYCE, and 
following the sale of NYCE Holdings, defendants shall not undertake, 
directly or indirectly, any challenges to the environmental, zoning, or 
other permits relating to the operation of NYCE.
    H. Unless the United States otherwise consents in writing, after 
consultation with plaintiff states, the divestiture pursuant to Section 
IV, or by trustee appointed pursuant to Section V, of this Final 
Judgment, shall include the entire NYCE Holdings as defined in Section 
II(G) and shall be accomplished in such a way as to satisfy the United 
States, in its sole discretion, after consultation with plaintiff 
states, that NYCE can and will be used by the Acquirer as part of a 
viable, ongoing business engaged in the provision of EFT network 
services, including PIN debit network services, and EFT processing 
services. Divestiture of NYCE Holdings may be made to an Acquirer, 
provided that it is demonstrated to the sole satisfaction of the United 
States, in its sole judgment, after consultation with plaintiff states, 
that the divested asset will remain viable and that the divestiture 
will remedy the competitive harm alleged in the Complaint. The 
divestiture, whether pursuant to Section IV or Section V of this Final 
Judgment,
    1. Shall be made to an Acquirer that, in the United States' sole 
judgment, after consultation with plaintiff states, has the intent and 
capability (including the necessary managerial, operational, technical, 
and financial capability) to compete effective in the provision of EFT 
network services, including PIN debit network services, and EFT 
processing services in the United States; and
    2. Shall be accomplished so as to satisfy the United States, in its 
sole discretion, after consultation with plaintiff states, that none of 
the terms of any agreement between an Acquirer and defendants give 
defendants the ability unreasonably to raise NYCE's costs, to lower 
NYCE's efficiency, or otherwise to interfere in the ability of NYCE to 
compete effectively.

V. Appointment of Trustee to Effect Divestiture

    A. If defendant First Data has not divested NYCE Holdings within 
the time period specified in section IV(A), it shall notify the United 
States and plaintiff states of that fact in writing. Upon application 
of the United States, in its sole discretion, after consultation with 
plaintiff states, the Court shall appoint a trustee selected by the 
United States, and approved by the Court to effect the divestiture of 
NYCE Holdings.
    B. After the appointment of a trustee becomes effective, only the 
trustee shall have the right to sell NYCE Holdings. The trustee shall 
have the power and authority to accomplish the divestiture of NYCE 
Holdings to an Acquirer acceptable to the United States, in its sole 
judgment after consultation with plaintiff states, at such price and on 
such terms as are then obtainable upon reasonable effort by the 
trustee, subject to the provisions of Sections IV, V, and VI of this 
Final Judgment, and shall have such other powers as this Court deems 
appropriate. Subject to Section V(D) of this Final Judgment, the 
trustee may hire at the cost and expense of defendant First Data nay 
investment bankers, attorneys, or other agents, who shall be solely 
accountable to the trustee, reasonably necessary in the trustee's 
judgment to assist in the divestiture.
    C. Defendants shall not object to a sale by the trustee on any 
ground other than the trustee's malfeasance. Any such objections by 
defendants must be conveyed in writing to the United States, plaintiff 
states, and the trustee within ten (10) calendar days after the trustee 
has provided the notice required under Section VI.
    D. The trustee shall serve at the cost and expense of defendant 
First Data, on such terms and conditions as the NYCE approves, and 
shall account for all monies derived from the sale of NYCE Holdings and 
all costs and expenses so incurred. After approval by the Court of the 
trustee's accounting, including fees for its services and those of any 
professionals and agents retained by the trustee, all remaining money 
shall be paid to defendant First Data and the trust shall then be 
terminated. The compensation of the trustee and any professionals and 
agents retained by the trustee shall be reasonable in light of the 
value of the asset to be divested and based on a fee arrangement 
providing the trustee with an incentive based on the price and terms of 
the divestiture and the speed with which it is accomplished, but 
timeliness is paramount.

[[Page 6333]]

    E. Defendants shall use their best efforts to assist the trustee in 
accomplishing the required divestiture. The trustee and any 
consultants, accountants, attorneys, and other persons retained by the 
trustee shall have full and complete access to the personnel, books, 
records, and facilities of the business to be divested, and defendants 
shall develop financial and other information relevant to such business 
as the trustee may reasonably request, subject to customary 
confidentiality protection for trade secret or other confidential 
research, development, or commercial information. Defendants shall take 
no action to interfere with or to impede the trustee's accomplishment 
of the divestiture.
    F. After its appointment, the trustee shall file monthly reports 
with the United States, plaintiff states, and the Court setting forth 
the trustee's efforts to accomplish the divestiture ordered under this 
Final Judgment. To the extent such reports contain information that the 
trustee deems confidential, such reports shall not be filed in the 
public docket of the Court. Such reports shall include the name, 
address, and telephone number of each person who, during the preceding 
month, made an offer to acquire, expressed an interest in acquiring, 
entered into negotiations to acquire, or was contacted or made an 
inquiry about acquiring, NYCE Holdings and shall describe in detail 
each contact with any such person. The trustee shall maintain full 
records of all efforts made to divest NYCE Holdings.
    G. If the trustee has not accomplished such divestiture within six 
months after its appointment, the trustee shall promptly file with the 
Court a report setting forth (1) the trustee's efforts to accomplish 
the required divestiture; (2) the reasons, in the trustee's judgment, 
why the required divestiture has not been accomplished; and (3) the 
trustee's recommendations. To the extent such reports contain 
information that the trustee deems confidential, such reports shall not 
be filed in the public docket of the Court. The trustee shall at the 
same time furnish such report to the United States and plaintiff 
states, and the United States and plaintiff states shall have the right 
to make additional recommendations consistent with the purpose of the 
trust. The Court thereafter shall enter such orders as it shall deem 
appropriate to carry out the purpose of the Final Judgment, which may, 
if necessary, include extending the trust and the term of the trustee's 
appointment by a period requested by the United States.

VI. Notice of Proposed Divestiture

    A. Within two (2) business days following execution of a definitive 
divestiture agreement, defendant First Data or the trustee, whichever 
is then responsible for effecting the divestiture required herein, 
shall notify the United States and plaintiff states of any proposed 
divestiture required by Section IV or V of this Final Judgment. If the 
trustee is responsible, it shall similarly notify defendants. The 
notice shall set forth the details of the proposed divestiture and list 
the name, address, and telephone number of each person not previously 
identified who offered or expressed an interest in or desire to acquire 
any ownership interest in NYCE Holdings, together with full details of 
the same.
    B. Within fifteen (15) calendar days of receipt by the United 
States and plaintiff states of such notice, the United States and 
plaintiff states may request from defendants, the proposed Acquirer, 
any other third party, or the trustee if applicable, additional 
information concerning the proposed divestiture, the proposed Acquirer, 
and any other potential Acquirer. Defendants and the trustee shall 
furnish any additional information requested within fifteen (15) 
calendar days of the receipt of the request, unless the parties shall 
otherwise agree.
    C. Within thirty (30) calendar days after receipt of the notice or 
within twenty (20) calendar days after the United States and plaintiff 
states have been provided the additional information requested from 
defendants, the proposed Acquirer, any third party, and the trustee, 
whichever is later, the United States, in its sole discretion, after 
consultation with plaintiff states, shall provide written notice to 
defendants and the trustee, if there is one, stating whether or not it 
objects to the proposed divestiture. If the United States provides 
written notice that it does not object, the divestiture may be 
consummated, subject only to defendants' limited right to object to the 
sale under section V(C) of the Final Judgment. Absent written notice 
that the United States does not object to the proposed Acquirer or upon 
objection by the United States, a divestiture proposed under Section IV 
or Section V shall not be consummated. Upon objection by defendants 
under Section V(C), a divestiture proposed under Section V shall not be 
consummated unless approved by the Court.

VII. Financing

    Defendants shall not finance all or any part of any purchase made 
pursuant to Section IV or V of this Final Judgment.

VIII. Hold Separate

    Until the divestiture required by this Final Judgment has been 
accomplished, defendants shall take all steps necessary to comply with 
the Hold Separate Stipulation and Order entered by this Court. 
Defendants shall take no action that would jeopardize the divestiture 
ordered by this Court.

IX. Affidavits

    A. Within twenty (20) calendar days of the Court's signing of the 
Hold Separate Stipulation and Order in this matter, and every thirty 
(30) calendar days thereafter until the divestiture has been completed 
under Section IV or V, defendants shall deliver to the United States 
and plaintiff states an affidavit as to the fact and manner of their 
compliance with Section IV or V of this Final Judgment. Each such 
affidavit shall include the name, address, and telephone number of each 
person who, during the preceding thirty days, made an offer to acquire, 
expressed an interest in acquiring, entered into negotiations to 
acquire, or was contacted or made an inquiry about acquiring, any 
interest in NYCE Holdings and shall describe in detail each contact 
with any such person during that period. Each such affidavit shall also 
include a description of the efforts defendants have taken to solicit 
buyers for the asset to be divested, and to provide required 
information to any prospective Acquirer, including the limitations, if 
any, on such information. Assuming the information set forth in the 
affidavit is true and complete, any objection by the United States, in 
its sole discretion, after consultation with plaintiff states, to 
information provided by defendants, including limitations on the 
information, shall be made within fourteen (14) calendar days of 
receipt of such affidavit.
    B. Within twenty (20) calendar days of the Court's signing of the 
Hold Separate Stipulation and Order in this matter, defendants shall 
deliver to the United States and plaintiff states an affidavit that 
describes in reasonable detail all actions defendants have taken and 
all steps defendants have implemented on an ongoing basis to comply 
with Section VIII of this Final Judgment. Defendants shall deliver to 
the United States and plaintiff states an affidavit describing any 
changes to the efforts and actions outlined in defendants' earlier 
affidavits filed pursuant to this section within fifteen (15) calendar 
days after the change is implemented.

[[Page 6334]]

    C. Defendants shall keep all records of all efforts made to 
preserve and divest NYCE Holdings until one year after such divestiture 
has been completed.

X. Compliance Inspection

    A. For purposes of determining or securing compliance with this 
Final Judgment, or of determining whether the Final Judgment should be 
modified or vacated, and subject to any legally recognized privilege, 
from time to time duly authorized representatives of the United States, 
including consultants and other persons retained by the United States, 
shall, upon written request of a duly authorized representative of the 
Assistant Attorney General in charge of the Antitrust Division, and on 
reasonable notice to defendants be permitted:
    1. access during defendants' office hours to inspect and copy, or 
at plaintiff's option, to require defendants to provide copies of, all 
books, ledgers, accounts, records and documents in the possession, 
custody, or control of defendants, relating to any matters contained in 
this Final Judgment; and
    2. to interview, either informally or on the record, defendants' 
officers, employees, or agents, who may have their individual counsel 
present, regarding such matters. The interviews shall be subject to the 
reasonable convenience of the interviewee and without restraint or 
interference by defendants.
    B. Upon the written request of a duly authorized representative of 
the Assistant Attorney General in charge of the Antitrust Division, 
defendants shall submit written reports, under oath if requested, 
relating to any of the matters contained in this Final Judgment as may 
be requested.
    C. No information or documents obtained by the means provided in 
this section shall be divulged by the United States to any person other 
than an authorized representative of the executive branch of the United 
States, except in the course of legal proceedings to which the United 
States is a party (including grand jury proceedings), or for the 
purpose of securing compliance with this Final Judgment, or as 
otherwise required by law.
    D. If at the time information or documents are furnished by 
defendants to the United States, defendants represent and identify in 
writing the material in any such information or documents to which a 
claim of protection may be asserted under Rule 26(c)(7) of the Federal 
Rules of Civil Procedure, and defendants mark each pertinent page of 
such material, ``Subject to claim of protection under Rule 26(c)(7) of 
the Federal Rules of Civil Procedure,'' then the United States shall 
give defendants ten (10) calendar days notice prior to divulging such 
material in any legal proceeding (other than a grand jury proceeding).

XI. No Reacquisition

    Defendants may not reacquire any ownership interest in NYCE during 
the term of this Final Judgment.

XII. Retention of Jurisdiction

    This Court retains jurisdiction to enable any party to this Final 
Judgment to apply to this Court at any time for further orders and 
directions as may be necessary or appropriate to carry to or construe 
this Final Judgment, to modify any of its provisions, to enforce 
compliance, and to punish violations of its provisions.

XIII. Expiration of Final Judgment

    Unless this Court grants an extension, this Final Judgment shall 
expire ten years from the date of its entry.

XIV. Public Interest Determination

    Entry of this Final Judgment is in the public interest.

Court approval subject to procedures of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. Sec. 16.

United States District Judge

Case Number 1:03CV02169
Judge: Rosemary M. Collyer.
Deck Type: Antitrust.
Date Stamp: 10/23/2003.

United States of America, United States Department of Justice, 
Antitrust Division, 600 E Street, NW., Suite 9500, Washington, DC 
20530,
State of Connecticut, Office of the Attorney General, 55 Elm Street, 
Hartford, CT 06106,
State of Illinois, Office of the Illinois Attorney General, 100 W. 
Randolph Street, 13th Floor, Chicago, IL 60601,
State of Louisiana, Department of Justice, 301 Main Street, Suite 
1250, Baton Rouge, LA 70801,
Commonwealth of Massachusetts, Office of the Attorney General, One 
Ashburton Place, Boston, MA 02108,
State of New York, Office of the Attorney General, 120 Broadway, 
Room 26C62, New York, NY 10271,
State of Ohio, Attorney General's Office, 150 E. Gay Street, 
Colombus, OH 43215,
State of Texas, Office of the Attorney General, P.O. Box 12548, 
Austin, TX 78711,

 and

District of Columbia, Office of the Corporation Counsel, 441 4th 
Street, NW., Suite 450-N, Washington, DC 20001, Plaintiffs,

 v.

First Data Corporation, 6200 South Quebec Street, Greenwood Village, 
CO 80111,

 and

Concord EFS, Inc., 2525 Horizon Lake Drive, Memphis, TN 38133, 
Defendants.

Verified Complaint

    The United States of America, acting under the direction of the 
Attorney General of the United States, and the states of Connecticut, 
Illinois, Louisiana, Massachusetts, New York, Ohio, and Texas and the 
District of Columbia (``Plaintiff States''), acting under the direction 
of their respective Attorneys General, or other authorized officials, 
bring this civil action to enjoin the proposed merger of First Data 
Corporation (``First Data'') and Concord EFS, Inc. (``Concord''), and 
allege as follows:
    1. First Data's acquisition of Concord would combine the largest 
and third-largest point-of-sale (``POS'') PIN debit networks in the 
United States. POS PIN debit networks are the telecommunications and 
payment infrastructure that connects merchants to consumers' demand 
deposit accounts at banks. These networks enable consumers to purchase 
goods and services from merchants through PIN debit transactions by 
swiping their bank card at a merchant's terminal and entering a 
Personal Identification Number, or PIN. Within seconds, the purchase 
amount is debited from the customer's bank account and transferred to 
the retailer's bank.
    2. PIN debit networks provide an increasingly important method of 
payment for consumers and retailers because PIN debit is the least 
expensive, most efficient, and most secure form of card payment. In 
2002, customers purchased more than $150 billion in goods and services 
using PIN debit networks. PIN debit transaction volume has grown by 
more than 20 percent annually over the past 5 years. Today, merchants 
accept PIN debit transactions at more than one million retail locations 
in the United States.
    3. Concord operates STAR, the nation's largest PIN debit network. 
STAR currently handles approximately half of all PIN debit transactions 
in the United States. First Data owns a controlling interest in NYCE, 
the nation's third-largest PIN debit network.
    4. PIN debit networks compete for merchants to accept and route 
purchases over their networks. A significant number of banks that issue 
debit cards participate in more than one PIN debit network. In some 
cases, this allows merchants to choose the network over which to route 
a transaction; merchants made this choice based on a variety of 
factors, including price and network performance. Large merchants

[[Page 6335]]

usually accept the debit cards of many PIN debit networks.
    5. First Data's acquisition of Concord would substantially reduce 
competition among the PIN debit networks for retail transactions in 
violation of section 7 of the Clayton Act, 15 U.S.C. 18. The merger 
would make prices for PIN debit network services to merchants less 
competitive. Merchants will pass on at least some of the higher costs 
of PIN debit transactions by raising the prices of their goods and 
services, to the detriment of tens of millions of consumers throughout 
the United States. The United States and Plaintiff States therefore 
seek an order permanently enjoining the merger.

I. Jurisdiction and Venue

    6. This action is filed by the United States under section 15 of 
the Clayton Act, 15 U.S.C. 25, to prevent and restrain the Defendants 
from violating section 7 of the Clayton Act, 15 U.S.C. 18.
    7. The Plaintiff States bring this action under section 16 of the 
Clayton Act, 15 U.S.C. 26, to prevent and restrain the Defendants from 
violation section 7 of the Clayton Act, 15 U.S.C. 18. The Plaintiff 
States, by and through their respective Attorneys General, or other 
authorized officials, bring this action in their sovereign capacities 
and as parens patriae on behalf of the citizens, general welfare, and 
economy of each of their states.
    8. First Data and Concord are engaged in interstate commerce and in 
activities substantially affecting interstate commerce. First Data and 
Concord provide PIN debit network services throughout the United 
States. First Data's and Concord's PIN debit networks are engaged in a 
regular, continuous, and substantial flow of interstate commerce, and 
have had a substantial effect upon interstate commerce as well as 
commerce in each of the Plaintiff States. The Court has jurisdiction 
over this action pursuant to sections 12 and 15 of the Clayton Act, 15 
U.S.C. 22, 25, and 28 U.S.C. 1331, 1337.
    9. First Data and Concord transact business and are found in the 
District of Columbia, Venue is proper under Section 12 of the Clayton 
Act, 15 U.S.C. 22, and 28 U.S.C. 1391(c).

II. The Defendants and the Transaction

    10. First Data is a corporation organized and existing under the 
laws of Delaware. In 2002, First Data reported total worldwide revenues 
of $7.6 billion. First Data is organized into four business groups: 
merchant services, payment services, card issuer services, and emerging 
payments. First Data's card issuing business offers a comprehensive set 
of services to banks that issue debit and credit cards. First Data's 
payment services group includes Western Union, the leading provider of 
consumer-to-consumer money transfer services.
    11. First Data's merchant services segment, which primarily 
consists of NYCE and the merchant processing and acquiring business, 
was responsible for $2.8 billion of the company's revenues in 2002. 
First Data owns 64 percent of NYCE Corporation, which operates the NYCE 
PIN debit and ATM network. Four large banks own the remaining 36 
percent of NYCE Corporation. In addition, First Data is the nation's 
leading merchant processor. A merchant processor connects merchants to 
the various payment networks, ensuring that each transaction is sent to 
the appropriate network. First Data also acts as a merchant acquirer; 
merchant acquirers sponsor merchants into the PIN debit networks, 
facilitate settlement, and assume financial responsibility for the 
transactions. First Data provides merchant processing and acquiring 
services independently and through a series of alliances and 
partnerships with major financial institutions.
    12. Concord is a corporation organized and existing under the laws 
of the state of Delaware. Concord's revenues in 2002 totaled nearly $2 
billion. Concord operates STAR, the largest PIN debit and ATM network. 
The STAR network is the result of a series of acquisitions of other 
large networks over the past several years. Concord bought MAC in 1999 
and Cash Station in 2000. Concord then acquired STAR in 2001; STAR 
itself had acquired the Honor network, which in turn had acquired MOST. 
Concord is also a leading merchant processor and acquirer and provides 
an array of services to debit card issuers and ATM owners.
    13. On April 1, 2003, First Data and Concord entered into an 
Agreement and Plan of Merger, pursuant to which First Data will acquire 
Concord in an all-stock transaction valued at approximately $7 billion.

III. The Relevant Market

A. Description of the Product

    14. In the late 1970s, bank consortiums formed numerous regional 
electronic funds transfer (``EFT'') networks to enable their customers 
to withdraw funds from ATMs owned by a variety of different banks. The 
EFT networks were first used to handle PIN debit purchases at retailers 
in the early 1980s. It was not until the mid-1990s, however, that PIN 
debit became a popular method of payment for consumers to purchase 
goods and services at retail stores. PIN debit transaction volume has 
grown substantially over the past five years due to merchant and 
consumer recognition of the advantages of PIN debit as a form of 
payment. Today, over 500 million PIN debit transactions are made every 
month. Nearly three-quarters of all PIN debit purchases occur at thirty 
large retail chains.
    15. Many EFT networks, including those operated by First Data and 
Concord, route both ATM and PIN debit transactions. Some companies, 
however, operate separate ATM and PIN debit networks. For example, 
while Interlink is Visa's PIN debit network, Visa operates a separate 
ATM network called Plus.
    16. A PIN debit network serves as the critical electronic switch 
connecting a network's participating financial institutions with 
merchants that accept the network. PIN debit networks provide one of 
the primary means for consumers to access the money in their checking 
accounts. A PIN debit network also performs a number of related 
functions necessary for the efficient operation of the network. For 
example, PIN debit networks: Promote their brand names among consumers, 
merchants, and banks; establish rules and standards to govern their 
networks; and set fees and assessments for use of the network's 
products and services. Collectively, these products and services are 
``PIN debit network services.''
    17. To execute a PIN debit transaction, a customer swipes a debit 
card at a POS terminal and enters a PIN on a numeric keypad. After the 
PIN is entered, the POS terminal transmits the transaction and bank 
card information to a ``merchant processor,'' which acts as a conduit 
between the merchant and the various PIN debit networks. The merchant 
processor sends the information to the appropriate PIN debit network, 
which switches the transaction to the issuing bank's ``card 
processor.'' The card processor accesses the bank's account database to 
verify the PIN and ensure that the customer has sufficient funds to pay 
for the purchase. The card processor sends an electronic message to the 
PIN debit network accepting or rejecting the transaction. The PIN debit 
network switches this reply back to the merchant through the merchant 
processor to complete the transaction. The entire authorization process 
takes place electronically in just seconds. At the same time, the 
merchant acquirer

[[Page 6336]]

``purchases'' the transaction from the merchant, guaranteeing payment 
and facilitating settlement of the transaction.
    18. A transaction can only be routed over a particular PIN debit 
network if the customer's bank issues a debit card that participates in 
that network. This participation is signified by placing the network's 
logo, or ``bug,'' on the card. To provide their customers with seamless 
access to the widest array of merchants, a significant number of banks 
place the bug of more than one PIN debit network on their cards. Many 
networks, including NYCE, have a ``priority routing'' rule that allows 
the card issuer to designate which PIN debit network will serve as the 
primary network for PIN debit transactions when the bank bugs its cards 
with two or more networks. STAR, by contrast, imposes a network routing 
rule, requiring most transactions on cards bearing the STAR bug to be 
routed over the STAR network, regardless of whether there are other 
bugs on the card.
    19. PIN debit networks charge both the merchant and the card-
issuing bank a ``switch'' fee for the network switching services 
provided by the network. This fee typically ranges from 2 cents to 4 
cents per transaction. The PIN debit networks also set an 
``interchange'' fee, which is a fee paid by the merchant to the PIN 
debit network. The PIN debit network then passes through the 
interchange fee to the card-issuing bank as compensation for permitting 
access to the consumer's bank account. The interchange fee is normally 
at least 4-5 times as large as the switch fee, ranging from as low as 
10 cents to as high as 45 cents, depending on the network, the 
merchant, and the size of the transaction. Consequently, the merchant's 
total charge for each PIN debit transaction is the interchange fee plus 
the switch fee.
    20. At some networks, such as NYCE and Interlink, an advisory board 
representing the network's bank members has substantial authority over 
setting the network's interchange rates and determining the network's 
rules, including rules concerning the routing of PIN debit 
transactions.
    21. The PIN debit network services market is characterized by 
significant network effects. Financial institutions are more likely to 
join networks that are accepted by many merchants. Conversely, 
merchants are more likely to accept networks that have many large 
financial institutions as members because the value of a particular PIN 
debit network depends in great measure on the breadth of its acceptance 
and use.
    22. Many debit cards can also execute ``signature'' debit 
transactions, in addition to PIN debit transactions. Signature debit 
transactions are authenticated like credit card transactions, with the 
customer signing for identification rather than entering a PIN. Visa 
and MasterCard developed the only two signature debit networks from 
their existing credit card infrastructure. In contrast to a PIN debit 
transaction, in which the funds are immediately transferred from the 
customer's account, a signature debit transaction generally takes 
twenty-four to forty-eight hours to settle.
    23. PIN debit networks offer a number of substantial advantages to 
consumers and merchants that distinguish them from signature debit 
networks. PIN debit networks are generally considerably less expensive 
to merchants than signature debit networks, due to significantly lower 
interchange rates. PIN debit networks also provide a more secure method 
of payment than signature debit because it is much easier to forge a 
person's signature than to obtain an individual's PIN; consequently, 
fraud rates for PIN debit are substantially lower than for signature 
debit. Because of the increased security of PIN debit, there is no need 
for the complicated and expensive charge-back procedures that allow 
consumers to challenge signature debit transactions, thereby saving 
merchants additional time and money. PIN debit transactions also settle 
instantaneously, guaranteeing the merchant ready access to its 
receipts, whereas signature debit transactions usually take a day or 
two to settle. Finally, PIN debit networks allow for faster execution 
than signature debit networks. With a PIN debit transactions, customers 
can enter their PIN as soon as the first product is scanned. By 
contrast, customers cannot sign for signature debit transactions until 
after the entire order is totaled, prolonging the checkout process.
    24.PIN debit networks also allow individuals to receive cash back 
at the register when making a purchase, a popular feature with many 
consumers. Customers cannot receive cash back when making a signature 
debit purchase. Today, customers request cash back in approximately 20 
percent of all PIN debit transactions. Customers also value the 
additional security provided by PIN verification as opposed to 
signature.

B. Relevant Product Market

    25. The relevant product market affected by this transaction is the 
provision of PIN debit network services. A hypothetical monopolist 
could profitably impose a small but significant and nontransitory 
increase in the price of all PIN debit network services.
    26. Signature debit networks are not in the same product market as 
PIN debit networks because signature debit networks are substantially 
more expensive and have inferior functionality and features. PIN debit 
networks would remain substantially less expensive than signature debit 
or credit care networks even after a small but significant 
nontransitory increase in price. Merchants would continue to purchase 
and promote the use of PIN debit network services because of the low 
fraud rate, corresponding lack of charge-backs, speed of execution at 
the register, and the cash back feature that many customers demand. As 
the President of First Data Merchant Services testified, PIN debit ``is 
still the lowest-cost, most efficient, most secure transaction there is 
out there in electronic transactions.''
    27. Merchants would not defeat a small but significant and 
nontransitory increase in the price of PIN debit network services by 
requiring or encouraging their customers to switch from PIN debit to 
signature debit or other payment methods.
    28. The provision of PIN debit network services is a line of 
commerce and a relevant product market within the meaning of section 7 
of the Clayton Act, 15 U.S.C. 18.

D. Relevant Geographic Market

    29. First Data and Concord compete with each other throughout the 
United States. Merchants in the United States could not switch to 
providers of PIN debit network services located outside of the United 
States in the event of a small but significant nontransitory increase 
in the price by PIN debit networks in the United States. While certain 
networks are stronger in particular areas of the country, the largest 
networks essentially operate on a national scale. Accordingly, the 
United States is a relevant geographic market within the meaning of 
Section 7 of the Clayton Act, 15 U.S.C. 18.

IV. Market Concentration

    30. The relevant market is highly concentrated and would become 
significantly more concentrated as a result of the proposed 
transaction. As of March 2003, the most recent period for which data is 
available, Concord accounted for approximately 56 percent of PIN debit 
transactions, while First Data had approximately a 10 percent share. 
The top four networks--STAR, Visa's Interlink, NYCE, and Pulse--routed 
over 90 percent of all PIN debit transactions. Using a standard measure

[[Page 6337]]

of market concentration called the ``HHI'' (defined and explained in 
Appendix A), the market is highly concentrated, with a pre-merger HHI 
of approximately 3590. First Data's acquisition of Concord would 
increase the HHI by approximately 1120, resulting in a post-merger HHI 
of approximately 4710. While STAR has recently lost some significant 
bank contracts to Interlink and NYCE, under even the most conservative 
estimate of future market shares the combined firm would have 
approximately a 45 percent post-merger share. Taking into account these 
lost contracts, the PIN debit network services market remains highly 
concentrated and would become substantially more concentrated as a 
result of the merger, with a post-merger HHI greater than 3000.

V. Anticompetitive Effects

A. The Proposed Transaction Will Likely Substantially Reduce 
Competition Among PIN Debit Networks

    31. First Data's acquisition of Concord will combine the largest 
and third-largest PIN debit networks and enable the resulting network 
to raise prices and to reduce levels of services to merchants.
    32. PIN debit networks compete for merchant business by attempting 
to convince merchants to accept their networks and to route to their 
networks when there is a choice of routing options. PIN debit networks 
also compete for merchants by improving their networks' transmission 
speed, limiting network down-time, and reducing the number of 
improperly rejected transactions. Merchants' ability to choose which 
networks to accept at their stores and their control over the routing 
of some transactions acts as a constraint on the price of PIN debit 
network services to merchants.
    33. While most large merchants generally accept all of the PIN 
debit networks, retailers can and have used the threat of dropping a 
network to obtain lower prices. For example, in 2001 Visa announced a 
substantial rate increase for its PIN debit network, Interlink; STAR, 
and later NYCE, followed by announcing comparable price increases. A 
number of large retailers responded by stating that if Interlink 
implemented the planned price increase, they would no longer accept 
Interlink. In response, Interlink delayed and substantially scaled back 
its proposed price increase. Then STAR delayed and reduced its planned 
price increase to remain competitive. Similarly, NYCE concluded in an 
internal document that its ``previously announced pricing [was] now out 
of balance with new market realities'' and followed suit.
    34. Combining STAR and NYCE will make it substantially more 
difficult for merchants to use the possibility of dropping a network to 
prevent price increases. The larger the network, the more risky it is 
for a merchant to drop that network because of the increased likelihood 
of rejected transactions, delays at check-out lines, customer confusion 
and backlash, lost sales, and customer use of other forms of payment 
that are more costly to the merchant.
    35. The PIN debit networks take into account the merchants' 
competitive reactions when they make decisions about pricing. Earlier 
this year, NYCE was considering raising interchange rates to attract 
financial institutions to the network. NYCE's internal analysis of the 
market recognized, however, that ``[t]aking a leadership role in POS 
interchange does not come without risk to the transaction growth engine 
of the NYCE Network and its current revenue stream * * * ''[P]recedent 
has been set via major retailers in the past dropping or threatening to 
drop a payment card network due to pricing. * * * [T]he risks are 
material that certain retailers or segments may decide to `send a 
message' and simply stop taking NYCE-branded cards for purchases.'' 
(emphasis added)
    36. First Data's acquisition of Concord will also reduce 
competition in the PIN debit market by limiting merchants' ability to 
route transactions to the least-cost network. Major supermarkets and 
mass merchandisers have obtained superior prices and levels of service 
by routing, or threatening to route, transactions away from NYCE to 
STAR and vice versa. After the merger, merchants will no longer be able 
to seek lower prices and improved service from the combined firm by 
playing off NYCE and STAR against each other in this manner.
    37. An internal merger planning document acknowledged the likely 
effect of First Data's acquisition of Concord on pricing in the PIN 
debit network services market: The ``[c]ombination of NYCE and STAR 
allows FDC [First Data Corp.] more leeway to set market pricing.''
    38. Interchange fees have risen dramatically in the past several 
years as the PIN debit network services market has become more highly 
concentrated. First Data's acquisition of Concord will likely 
exacerbate this trend toward higher pricing by further reducing 
competition in the market. Merchants will be forced to pass on a 
significant portion of the higher fees to tens of millions of 
consumers, in the form of higher prices for all goods and services. 
Merchants do not typically pass through increase costs for particular 
forms of payment on a per-transaction basis.
    39. Any efforts the combined First Data/Concord might make to 
expand PIN debit usage after the merger would not prevent the company 
from raising prices to merchants that already accept PIN debit. PIN 
debit networks are able to charge different prices to merchants based 
on the value of the network to the particular company or type of 
merchant. For example, First Data and Concord have both recently 
offered substantial discounts to quick-service restaurants to encourage 
them to deploy PIN pads at all of their locations. At the same time, 
First Data and Concord have dramatically raised their merchant fees to 
the market as a whole. This ability to engage in price discrimination 
will facilitate First Data's exercise of market power post-merger by 
allowing it to simultaneously raise prices to merchants that already 
accept PIN pads and cut special deals to attract new market segments to 
the network.

B. Lack of Countervailing Factors

    40. It is unlikely that entry or expansion in the PIN debit network 
services market will occur in a timely manner or on a scale sufficient 
to undo the competitive harm that the merger will produce. Entry and 
expansion are difficult because they require large, sunk investments to 
attract bank members, and, to a lesser degree, participating merchants. 
Coordinate development of both bank members and merchant acceptance is 
critical because the utility of a particular PIN debit network to 
customers, banks, and merchants depends not only on the cost and 
features of the card, but also on the breadth of its acceptance and 
use. These network effects that characterize the PIN debit network 
services market make it difficult for small networks to significantly 
expand their market share.
    41. Banks would have little incentive to join a new or small 
network that was attempting to expand market share by offering lower 
interchange rates to merchants. To the contrary, a bank would only have 
an incentive to join a network if it offered higher interchange rates. 
Without such bank participation, a network's attempts to expand would 
prove fruitless. Moreover, financial institutions benefit from a market 
structure characterized by a limited number of significant PIN debit 
networks and face fewer competitive constraints to setting higher 
prices to merchants.

[[Page 6338]]

    42. The PIN debit networks have adopted rules and policies that 
further increase the cost for a network to expand by developing bank 
and merchant participation. For example, the networks' priority routing 
rules make entry more difficult and less likely. Even if a network 
succeeds in convincing banks to add its bug to the banks' debit cards, 
the network is unlikely to see many transactions because of the 
priority routing rules. In addition, STAR requires its member banks to 
use STAR for both ATM and PIN debit network services; this all-or-
nothing requirement makes it more difficult for competing networks to 
convince banks to participate in their network. Finally, banks that 
want to act as acquirers for STAR ATM and PIN debit transactions must 
issue cards that participate in the STAR network. Because a significant 
number of banks have substantial ATM or merchant acquiring businesses, 
the STAR rule further inhibits potential expansion by competing PIN 
debit networks. After the merger, the application of any or all of 
these rules to First Data/Concord's combined network would inhibit 
entry or expansion by other PIN debit networks.
    43. Finally, the combination of First Data's and Concord's merchant 
processing businesses with their PIN debit networks will raise barriers 
to entry. The combined First Data/Concord will process more than half 
of all PIN debit transactions. As the merchant processor, the merged 
firm will have significant control over which network routes a 
transaction on a double-bugged card. As the owner of the dominant PIN 
debit network, First Data will have a significant incentive to exercise 
this control after it acquires Concord, inhibiting other PIN debit 
networks from expanding their presence in the market.

VI. Violation Alleged

    44. The United states and the Plaintiff States hereby incorporate 
paragraphs 1 through 43.
    45. First Data's acquisition of Concord would likely substantially 
lessen competition in the provision of PIN debit network services, in 
violation of section 7 of the Clayton Act, 15 U.S.C. 18. The 
transaction would likely have the following effects, among others:
    (a) competition between First Data and Concord in the provision of 
PIN debit network services would be eliminated;
    (b) competition generally in the provision of PIN debit network 
services would be eliminated or substantially lessened;
    (c) prices of PIN debit network services to merchants that 
currently use them would likely increase to levels above those that 
would prevail absent the merger, forcing merchants to pass on these 
increased costs in the form of higher prices for all goods and services 
to tens of millions of consumers; and
    (d) quality in the provision of PIN debit network services would 
likely decrease to levels below those that would prevail absent the 
merger.

Request for Relief

    46. The United States and the Plaintiff States request:
    (a) that the proposed acquisition be adjudged to violate section 7 
of the Clayton Act, 15 U.S.C. 18;
    (b) that the Defendants be permanently enjoined and restrained from 
carrying out the Agreement and Plan of Merger dated April 1, 2003, or 
from entering into or carrying out any agreement, understanding, or 
plan by which First Data would merge with or acquire Concord, its 
capital stock, or any of its assets;
    (c) that the United States and the Plaintiff States be awarded 
costs of this action;
    (d) that as the Court may deem appropriate, the Plaintiff States be 
awarded reasonable attorneys fees and costs as permitted by law; and
    (e) that the United States and the Plaintiff States have such other 
relief as the Court may deem just and proper.

    Dated: October 23, 2003.

For Plaintiff United States:

R. Hewitt Pate,
Assistant Attorney General (D.C. Bar No. 473598).

Deborah P. Majoras,
Deputy Assistant Attorney General (D.C. Bar No. 474239).

J. Robert Kramer, II,
Director of Operations.

Renata B. Hesse,
Chief (Calif. Bar No. 148425), N. Scott Sacks, Assistant Chief (D.C. 
Bar No. 913087), Networks & Technology Enforcement Section.

 Respectfully submitted,

Joshua H. Soven,
(D.C. Bar No. 436633).

Craig W. Conrath,
Minnesota Bar No. 18569), Counsel of Record

Trail Attorneys, U.S. Department of Justice, Antitrust Division, 
Networks & Technology Enforcement Section, 600 E Street, NW Suite 
9500, Washington, DC 20530, (202) 307-6200.

 For Plaintiff State of Connecticut

Richard Blumenthal,
Attorney General.

Steven M. Rutstein,
Assistant Attorney General,
Department Head/Antitrust Department,
Federal Bar No. ct09086.

Rachael O. Davis,
Assistant Attorney General,
Antitrust Department,
Federal Bar No. ct07411.
DC Bar No. 41357 (inactive).

55 Elm Street,
Hartford, Connecticut 06106, Tel: (860) 808-5040. Fax: (860) 808-
5033.

 For Plaintiff State of Illinois,

Lisa Madigan,
Attorney General.

Robert W. Pratt,
IL ARDC NO. 2247593,
Chief, Antitrust Bureau.

Liva S. West,
IL ARDC NO. 6276883, Assistant Attorney General, Office of the 
Illinois Attorney General, 100 W. Randolph Street, 13th Floor, 
Chicago, IL 60601, Tel: 313-814-6021. Fax: 312-814-1154.


    October 20, 2003.

    Louisiana's Signature Page for the FDC/Concord merger opposition 
case

Attorney General,
Richard P. Ieyoub.

Jane Bishop Johnson, 21651,
Louisiana Department of Justice, 301 Main Street, Suite 1250, Baton 
Rouge, LA 70801, (225) 342-2754, (225) 342-96537 (FAX).

    For the Plaintiff, the Commonwealth of Massachusetts

 Thomas F. Reilly,
Attorney General

Betsy S. Whittey, BBO645593,
Assistant Attorney General, Consumer Protection and Antitrust 
Division, One Ashburton Place, Boston, MA 02108, 617-727-2200 ext. 
2968, 617-727-5765.

    For Plaintiff State of New York:
    Office of the Attorney General

Jay L. Himes,
Chief, Antitrust Bureau,
N.Y., Attorney No., 1236934

Richard E. Grimm,
Assistant Attorney General, N.Y. Attorney No. 1337138.

Antitrust Bureau,
Office of the Attorney General, 120 Broadway Room 26C62, New York, 
New York 10271-0332, Tel: (212) 416-8282, (212) 416-8280, Fax: (212) 
416-6015.
    United States of America, et al. (State of Ohio) v. First Data 
Corporation and Concord EFS, Inc.

    For Plaintiff State of Ohio.

Jim Petro,
Attorney General,
State of Ohio.

Mitchell L. Gentile,
OH Bar Number 0022274,
Principal Attorney,
Antitrust Section,
Ohio Attorney General's Office,
150 E. Gay Street,
Columbus, OH 43215-3031,
Tel: 614-466-4328,
Fax: 614-995-0266.

    For Plaintiff State of Texas.

Greg Abbott,

[[Page 6339]]

Attorney General of Texas.

Barry R. McBee,
First Assistant Attorney General.

Edward D. Burbach,
Deputy Attorney General for Litigation.

Mark Tobey,
Assistant Attorney General,
Chief, Antitrust Division.

Rebecca Fisher,
Assistant Attorney General,
State Bar No. 07057800.

Office of the Attorney General, P.O. Box 12548, Austin, Texas 78711-
2548, 512/463-2185, 512/320-0975 (Facsimile).

    Signature by the State of Texas of Complaint in United States of 
America, et al, v. First Data Corporation and Concord EFS, Inc.

Robert J. Spagnoletti,
Corporation Counsel, DC.

Charlotte W. Parker (Bar 186205),
Deputy Corporation Counsel,
Civil Division.

Bennett Rushkoff (Bar 386925),
Senior Counsel,
Don Allen Resnikoff (Bar #386688),
Assistant Corporation Counsel,
Anika Sanders Cooper (Bar #458863),
Assistant Corporation Counsel.

Office of the Corporation Counsel, 441 4th Street, NW., Suite 450-N, 
Washington, DC 20001 (202) 727-4170.

    Attorneys for the District of Columbia.

Appendix A

Herfindahl-Hirschman Index

    ``HHI'' means the Herfindahl-Hirschman Index, a commonly 
accepted measure of market concentration. It is calculated by 
squaring the market share of each firm competing in the market and 
then summing the resulting numbers. For example, for a market 
consisting of four firms with shares of 30%, 30%, 20%, and 20%, the 
HHI is 2600 (30\2\ + 30\2\ + 20\2\ + 20\2\ = 2600). (Note: 
Throughout the Compliant, market share percentages have been rounded 
to the nearest whole number, but HHIs have been estimated using 
unrounded percentages in order to accurately reflect the 
concentration of the various markets.) The HHI takes into account 
the relative size distribution of the firms in a market and 
approaches zero when a market consists of a large number of small 
firms. The HHI increases both as the number of firms in the market 
decreases and as the disparity in size between those firms 
increases.
    Markets in which the HHI is between 1000 and 1800 points are 
considered to be moderately concentrated, and those in which the HHI 
is in excess of 1800 points are considered to be highly 
concentrated. See Horizontal Merger Guidelines ] 1.51 (revised Apr. 
8, 1997). Transactions that increase the HHI by more than 100 points 
in concentrated markets presumptively raise antitrust concerns under 
the guidelines issued by the U.S. Department of Justice and Federal 
Trade Commission. See id.

[FR Doc. 04-2688 Filed 2-9-04; 8:45 am]
BILLING CODE 4410-11-M