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MasterCard to incorporate
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August 15, 2001: 9:03 a.m. ET
Credit card network files to become private share company
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NEW YORK (CNNfn) - MasterCard International said Wednesday it has filed with the Securities and Exchange Commission to change from a membership organization to a private share company.
MasterCard's filing begins a formal review process by the SEC, which would be followed by a vote of MasterCard's principal members. If successful, MasterCard and its European partner, Europay, will receive shares of MasterCard Inc. and a revised membership interest in MasterCard International, which will continue as MasterCard Inc.'s key operating subsidiary.
"We think it will allow us to react much more quickly to changes in the marketplace - make us much more efficient," MasterCard spokeswoman Sharon Gamsin said. "A lot of companies are global and they want to be serviced by global banks. We want to be able to serve them in a more uniform way."
MasterCard has had a long-standing alliance with Europay, which has exclusive licensing rights for MasterCard brands in the European region. MasterCard owns a 12.25 percent share of Europay and a 15 percent interest in EPSS, Europay's processing subsidiary. The European members of MasterCard, who are also shareholders of Europay, presently control approximately 7 percent of MasterCard International's total votes. In addition, MasterCard and Europay each own 50 percent of Maestro, an online debit program.
The move comes as MasterCard and Visa International, which share the same infrastructure and together control more than 90 percent of U.S. credit card purchases, await a federal judge's decision on a Department of Justice antitrust suit charging the networks with anticompetitive practices.
The suit also comes amid a class action lawsuit by hundreds of retailers alleging MasterCard and Visa extract unreasonable fees for certain debit purchases.
Gamsin said the incorporation is not likely to have any bearing on either suit since the network's structure and relationship with banks in the United States will remain essentially the same.
MasterCard and Visa are owned by a collection of banks, which issue their cards The antitrust case challenges the networks' exclusivity rule that prohibits participating banks from issuing other companies' credit cards. The suit also challenges the close relationship the two networks have historically shared. 
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