The European Commission accused global credit card and payment system company Visa International yesterday of breaching European Union competition rules by refusing to admit US bank Morgan Stanley to its network in Europe.

Visa, an unlisted grouping of 21,000 banks and financial services providers, retorted that it was defending competition by denying a direct rival access to its proprietary information.

A statement from the EU executive described as discriminatory the decision by Visa to bar the US investment bank from its network of connected shops and merchants in the European Union because it operated the rival Discover credit card in the United States.

Owners of several other payment card schemes had been admitted as Visa members, notably Citigroup, which owns the global Diners Club network.

"The Commission is concerned that this Visa membership rule is not applied in an objective and non-discriminatory manner vis-a-vis all applicants for Visa membership," it said, explaining preliminary charges against the Visa association.

The rule was not illegal but it was applied inconsistently.

"Visa has failed to explain why a global network such as Diners Club which operates in over 200 countries, including Europe, should be less of a threat to Visa than a regional network like Discover, which operates only in the US and does not have any presence in Europe," it said.

Rival credit card association MasterCard did not apply any such rule, and had admitted Morgan Stanley as a member to its network.

A spokesman for Visa International in London, Mr David Masters, said since Morgan Stanley operated a rival credit card, "any decision that allows them access to proprietary Visa information will inevitably reduce competition between payment systems".

Rejecting the charge of inconsistency, he said the rules were applied objectively but reviewed in the light of changing circumstances.

"When the rule was adopted in 1989, Visa did not seek to apply the rule to Citicorp, given the insignificance of Diners Club overall - it accounts for less than 1 per cent of payment card turnover worldwide," Masters said.

Diners Club's membership in the EU was also fragmented.

Visa has three months to respond to the Commission's concerns and can request an oral hearing.

Morgan Stanley Dean Witter filed a complaint with the Commission in April 2000. - (Reuters)