Assume Co.#1 and Co.#2 are the two largest providers in the market for general purpose credit card network products and services.Together, Co.#1 and Co.#2 account for 75% of the dollar volume of transactions, and account for 86% of the number of general purpose cards issued.Both Co.#1 and Co.#2 are joint ventures (associations) that are owned and operated by the member banks that issue cards and provide card acceptance services.The member banks have an interest in both Co.#1 and Co.#2 (known as duality) and have representatives serving on the board of directors or important committees of both Co.#1 and Co.#2.

Since the member banks of Co.#1 and Co.#2 have a significant interest in both Co.#1 and Co.#2, they have little incentive or desire to compete directly against one another.The member banks have refused efforts by Co.#2 management to develop its brand through marketing campaigns.The banks felt that this action would hurt the Co.#1 brand, which the banks have a stake in.They have also not supported new product development, unless the new development was available to both Co.#1 and Co.#2.In addition to avoiding competition between brands, the member banks have prohibited its banks from issuing competing credit cards.They have also worked jointly to discourage merchant acceptance of competing cards and access to ATMs for cash advances.

How does the dual ownership of Co.#1 and Co.#2 lessen competition between the two?