Antitrust Law Daily Wrap Up, ANTITRUST—E.D.N.Y.: 7-Eleven, Home Depot claims against Visa defendants survive summary judgment, (Apr 15, 2024)

By Justin Marcus Smith, J.D.

Although 7-Eleven and Home Depot claims survived, the court deemed the equitable relief class debit monopolization claim “economically senseless” while their credit monopolization claim lacked necessary evidence about both sides of the two-sided transaction platform.

In the long-running multidistrict action alleging that Visa, Mastercard, and numerous banks violated federal and state antitrust laws by conspiring to inflate certain transaction fees, the federal district court in Brooklyn, New York: 1) denied the defendants’ motion for summary judgment as to the 7-Eleven and Home Depot plaintiffs’ debit monopolization claim and attempted monopolization claim; 2) granted the defendants’ motion for summary judgment as to the 7-Eleven and Home Depot plaintiffs’ conspiracy to monopolize claim; and, 3) granted the defendants’ motion as to the equitable relief class plaintiffs’ debit and credit monopolization claims. The court undertook a painstaking analysis of the claims (In Re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, April 10, 2024, Brodie, M.).

In the original 2005 lawsuit, merchants alleged that Visa and MasterCard adopted and enforced numerous rules relating to payment cards, including interchange fee rules, anti-steering rules, exclusionary rules, and "honor-all-cards" rules, with the combined effect of unreasonably restraining trade and injuring merchants (see Antitrust News, Mar. 27, 2024). In 2012, the parties agreed to a $7.25 billion settlement, but the Second Circuit vacated the court’s preliminary approval.

In a 2016 opinion, the Second Circuit found that class counsel, in representing separate classes for both damages and injunctive relief, had a conflict of interest. A Second Circuit panel later affirmed a separate $5.6 billion settlement of antitrust claims against Visa and MasterCard over interchange fees (Fikes Wholesale, Inc. v. HSBC Bank USA, N.A.) (see Antitrust, Mar. 16, 2023).

Several plaintiffs and several defendants in the instant matter, including banking defendants, moved for summary judgment or partial summary judgment in late 2020. The court partly granted and partly denied the defendants’ motion for summary judgment.

Antitrust standing. The court found the plaintiffs’ allegations were sufficient to perfect antitrust standing. The court found they identified objectionable practices and the manner of potential exclusion of other PIN debit networks from the debit transactions market. The injury alleged was cognizable under antitrust law: downstream merchants, as opposed to defendants’ direct horizontal competitors, were allegedly forced to pay supracompetitive prices because of unlawfully limited competition. The same was true for post-Durbin Amendment policies.

Market definition. To begin its review on the merits, the court found that debit-card transactions in the U.S. were the relevant market for two reasons: 1) a plaintiff expert had assessed that credit-card transactions, cash, or checks, were not reasonable substitutes; and, 2) the transaction platform definition was two-sided consistent with Amex and US Airways II.

Monopolization. Turning to monopoly power, the court concluded the defendants did not show they were entitled to summary judgment that Visa did not have monopoly power. A plaintiff expert assessed that Visa had about 60% debit processing market share by debit volume between 2009 and 2015, with no other competitor processing more than 23% of debit volume. The expert said the market was also highly concentrated, with high barriers to entry, and that Visa could control prices or exclude competition through exclusivity deals with issuers. Monopoly power alone was insufficient to show unlawful monopolization, but evidence of sustained 60% market share, combined with evidence of high barriers to entry, supracompetitive prices, and exclusivity deals, precluded summary judgment for the defendants.

The court acknowledged that conduct in support of a monopolization claim is a matter of perennial debate, but the court found the plaintiffs offered sufficient evidence of anticompetitive effect to also preclude summary judgment for defendants. The court did not agree with the defendants that a Section 2 claim requires proof of actual foreclosure of competition. The court said the cases the defendants cited offered little support for that. Foreclosure was only one way of showing anticompetitive conduct, so the court would not require foreclosure of the plaintiffs to avoid summary judgment against them. The court held the plaintiffs raised a triable question about their bundled discount Section 2 claims. Those claims did not require substantial foreclosure.

Last, the court agreed with the plaintiffs that the court should assess the defendants’ conduct holistically because there are many ways to show monopolization, not just bundled discounts and exclusive dealing. The court said the emphasis should always be on actual market dynamics rather than rote application of any formula. It concluded a jury would be entitled to conclude that Visa’s discounts contributed to its maintenance of monopoly power, especially when viewed in conjunction with other challenged conduct, and that Visa actually excluded competition in light of certain of its market shares.

The court held the plaintiffs also raised triable questions of fact pertinent to other conduct, like the imposition of PIN-authenticated Visa debit and EMV-related, contributed to Visa’s maintenance of monopoly power. The plaintiffs had already offered enough evidence of anticompetitive effects, like increased prices, decreased output, and quality to survive defendants’ motion for summary judgment under Amex. The court accordingly denied the defendants’ motion for summary judgment on the plaintiffs’ Section 2 monopolization claims.

Attempted monopolization. Despite the plaintiffs’ failure to respond to the defendants’ arguments about attempted monopolization, the court found the record evidence precluded summary judgment for the defendants. The defendants argued the plaintiffs had not shown a “dangerous probability” of monopoly power or specific intent to monopolize, based in part on modest Visa market share decline settling at about 60% as of 2017. This ran against the court’s holding that questions of fact remained on whether Visa had monopoly power, which necessarily implied a triable question about whether Visa had a “dangerous probability of achieving monopoly power.”

As to specific intent to monopolize, various Visa statements about increasing incentives to merchants who did not understand the difference between Visa Debit and US Debit would permit a jury to conclude Visa had specific intent to stop merchants from using competitor PIN debit networks without a valid business justification. The court concluded here that triable issues remained about specific intent. It could not grant summary judgment to the defendants on attempted monopolization.

Conspiracy. In contrast, the court granted the defendants’ motion on Section 2 conspiracy to monopolize claims because the evidence of Visa specific intent to monopolize debit transactions was not strong enough to permit a reasonable jury to infer that the bank defendants had specific intent to help Visa do that. The defendants argued the fact that the bank defendants sat on Visa’s board was not enough. Among other things, many were also owner-members of the pre-IPO Mastercard joint venture. It was not clear that a Visa monopoly at the expense of the Mastercard effort would have been in the bank defendants’ best interests.

Equitable relief. The court granted summary judgment to the defendants with respect to the equitable relief plaintiffs’ debit monopolization claim because there was not enough evidence to permit a reasonable jury to conclude the defendants’ conduct was exclusionary. The plaintiffs also did not explain how the credit card market conduct they alleged, like the offering of high rewards cards, could cause a debit monopoly. To the extent the equitable relief plaintiffs argued credit cards competed with debit cards, that undermined their relevant market argument that the two markets were distinct. The court accordingly granted summary judgment to the defendants on the equitable relief debit monopolization claim because it was “economically senseless.”

As for credit monopolization, with the relevant market for the equitable relief claims confined to credit-card transactions, the court granted summary judgment to the defendants because the evidence was entirely one-sided with respect to the transaction platforms. The plaintiffs had to address both sides in case like this involving two-sided transaction platforms. The court found evidence of control was also lacking. The court granted the defendant’s motion for summary judgment on the equitable relief plaintiffs’ credit monopolization claims accordingly.

The Case is No. 1:05-md-01720-MKB-JAM.

Attorneys: Jeffrey Isaac Shinder (Constantine Cannon LLP) for Camp Grounds Coffee, LLC, 803 Kava LLC and Dell Fox Jewelry LLC. Mark E. Tully (Goodwin Procter, LLP) for Visa, U.S.A., Inc. Abby Faith Rudzin (O'Melveny & Myers LLP) for Capital One Bank. Charles Bedford Hampton (McGuireWoods LLP) for Wells Fargo & Co.

Companies: Camp Grounds Coffee, LLC; 803 Kava LLC; Dell Fox Jewelry LLC; Visa, U.S.A., Inc.; Capital One Bank; Wells Fargo & Co.

Cases: Antitrust NewYorkNews