U.S. Justice Department Blocks First Data-Concord Merger

Arguing that the transaction would stifle competition in the market for transactions secured with personal identification numbers, the Department of Justice filed suit today to stop a proposed $7.3 billion acquisition of Concord EFS by First Data Corp. Officials of Justice's antitrust division argued that the merger would weaken competition in the PIN-based debit processing market, leading to higher prices for merchants and ultimately for consumers. First Data, based in Denver, Colo., operates the NYCE electronic funds transfer network, while Memphis-based Concord owns the Star, MAC, and Cash Station networks. Analysts have estimated the combination of these networks would give the combined companies control of 70% of PIN-based transactions. The action comes despite heavy lobbying by First Data to win approval of the merger, which was announced last April. In a joint statement, the companies said they were aware that the Department of Justice intended to file suit, and that they “will make further comment upon receipt of the complaint.” Concord, in an earnings statement released earlier today, announced it had enjoyed a strong third quarter, with revenues for its Network Services division, which runs its EFT networks, up 9% to $169.2 million; transactions were up a like 9%. Year to date, the company said, transactions are up 12%, including an 18% increase for Star. But it also disclosed that expenses related to the merger were expected to total as much as $23 million for the year, exclusive of investment-banking fees upon completion of the deal. At the same time, Wells Fargo and Wachovia have announced intentions to switch their PIN-based debit business to Visa's Interlink network from Star.