Antitrust Law Daily Wrap Up, ANTITRUST—DDC: Conspiracy to Set ATM Fees Not Adequately Alleged, (Feb 14, 2013)

By Jeffrey May, J.D.

The federal district court in Washington, D.C. has dismissed antitrust claims against Visa and MasterCard for allegedly imposing terms on banks and automatic teller machine (ATM) operators that suppress competition and force ATM operators to charge consumers supra-competitive access fees. Three separate actions were dismissed without prejudice on two grounds: (1) insufficient facts to support the allegations that plaintiffs suffered any injury; and (2) insufficient facts to support an alleged horizontal conspiracy (National ATM Council, Inc. v. Visa, Inc., February 13, 2013, Jackson, A.).

According to the court, “the complaints bristle with indignation, but when one strips away the conclusory assertions and the inferences proffered without factual support, there is very little left to consider.”

The suits involve fees imposed by an ATM operator on a consumer who initiates a transaction on an ATM operated by an entity other than the consumer's own bank. The plaintiffs claim that the ATM access fee pricing requirements that Visa and MasterCard have imposed on banks and ATM operators prohibited ATM operators from charging fees for transactions processed over Visa and MasterCard networks that were higher than the lowest access fees charged for transactions processed over other payment networks. Thus, ATMs that accepted Visa- or MasterCard-branded cards could not charge consumers using those cards more for their transactions than they charged consumers whose transactions were processed on other ATM networks.

Visa and MasterCard maintained that the provisions in question simply established a ceiling on ATM access fees and were akin to valid “most favored nation” clauses. However, the plaintiffs characterized the provision as setting a floor beneath which prices for transactions processed on other networks could not be discounted.

The suits were brought by a trade association that represents owners and operators of independent, non-bank-owned ATMs, 13 owners/operators of these independent ATMs, and consumers who used ATMs and paid ATM access fees as a result.

Injury

In order to have standing to sue on an antitrust claim, a private plaintiff must show (1) that the defendant’s alleged wrongdoing has caused him to suffer an injury in fact that affected his business or property; and (2) that the injury was the kind of injury the antitrust laws were intended to prevent, the court explained.

The plaintiffs failed to establish injury in fact. “[N]one of the complaints does anything more than make the ‘but for’ claim,” according to the court.

The plaintiffs’ contention that consumers suffered injury, because they were forced to pay inflated, “supra-competitive” ATM access fees due to the Visa and MasterCard access fee rules, was an unsupported conclusion, the court ruled. There were no facts alleged to support the contention that consumers were being overcharged.

Also rejected was the assertion that, without the rules, ATM operators could send transactions to “lower cost networks” and would pass that cost savings on to consumers in the form of lower access fees. The notion that there were other networks that actually charged the ATM operators less—thereby giving rise to savings that could be passed along to the consumer—was not stated by the plaintiffs.

The court also concluded that there were no facts supporting an inference that the access fee requirements injured the independent ATM operators. It was the consumers, not the operators, who paid the allegedly inflated ATM access fees, the court explained.

“If ATM operators are required to charge consumers more for ATM transactions than they might absent the access fee rules, the rules tend to benefit operators by increasing their revenue,” according to the court. “This does not constitute antitrust injury.”

The court also rejected as “highly conclusory” allegations that the access fee requirements enabled Visa and MasterCard “to charge artificially high network fees,” “remit inadequate compensation to ATM operators,” and “steer excessive and disproportionate compensation” to their member banks, to the benefit of the card companies and member banks.

Agreement or Conspiracy

In addition, the complaints failed to allege the existence of an agreement or conspiracy, the court ruled. The plaintiffs alleged that the challenged access fee rules originated in the rules and regulations agreed to by the banks before Visa and MasterCard became public corporations and that these rules created a horizontal conspiracy. However, the allegations that banks used to belong to the bankcard associations did not provide factual support for the conclusion that banks were engaged in a horizontal conspiracy, the court ruled. There were no factual allegations that allowed the conclusion that any control that banks might have once exercised over Visa and MasterCard when they were associations continued today.

The case is No. 1:11-cv-01803 (ABJ).

Attorneys: Daniel A. Small (Cohen Milstein Sellers & Toll PLLC) for National ATM Council, Inc. Mark R. Merley (Arnold & Porter LLP) for Visa, Inc.

Companies: MasterCard, Inc; Visa, Inc.

Cases: Antitrust DistrictofColumbiaNews