Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Merchants allege Visa and MasterCard conspired to fix card interchange fees, (May 14, 2015)

By Peter Reap, J.D., LL.M.

Visa and MasterCard and their issuing and acquiring banks have conspired to fix credit/debit card interchange fees paid by retail merchants, according to a complaint filed by several merchants in the federal district court of Marshall, Texas (BSN Sports LLC v. Visa, Inc., May 12, 2015).

Visa and MasterCard are national bank card associations of member banks and financial institutions that issue credit and debit cards to consumers. Interchange fees are imposed on retail merchants by Visa and MasterCard for the privilege of accepting an issuing bank’s card from a consumer as a means of payment.

Specifically named as defendants in the suit are Visa Inc., Visa U.S.A. Inc., and Visa International Service Association (collectively, “Visa”), MasterCard Incorporated, and MasterCard International Incorporated (collectively, “MasterCard”). The plaintiffs are BSN SPORTS LLC, Kwik Trip, Inc., ADFP Management Inc., Citi Trends, Inc., Allsup's Convenience Stores, Inc., RaceTrac Petroleum, Inc., Quick Chek Corporation, QuikTrip Corporation, QuikTrip West, Incorporated, Wawa, Inc., and Waffle House, Inc. as Assignee on Behalf of Waffle House Franchises.

The plaintiffs accept both Visa and MasterCard debit and credit cards for payment in their businesses. Accordingly, they allege that they have been forced to pay supra-competitive interchange fees and to abide by the defendants' competitive restraints.

The complaint claims that banks that are members of Visa and MasterCard compete with each other in the issuance of credit and debit cards to consumers and earn income when consumers select and use their cards. Visa and MasterCard have adopted nearly identical operating regulations that are agreed to by their member banks. These rules eliminate competition among member banks for merchant acceptance of credit and debit cards because Visa and MasterCard have as members nearly all the card issuers in the United States. The rules also constitute competitive restraints in the setting of “default” interchange fees, such as the Honor All Cards rules, the All Outlets rules, the No Discount rules, and the No Surcharge rules.

The setting of default interchange fees has effectively fixed the price of acceptance at a supra-competitive level and allows issuing banks to charge interchange fees in excess of the banks’ costs, the plaintiffs charged. Merchants have paid significantly higher costs to accept Visa and MasterCard brand credit and debit cards than they would have if the member banks issuing the cards competed for merchant acceptance. By continuing to agree and adhere to the competitive restraints, the member banks have deprived the market of actual or potential competition, the complaint states.

Although both Visa and MasterCard purport to set non-binding default interchange fees, acquiring banks that do not deduct the applicable interchange fee when submitting a transaction for authorization, clearance, and settlement are subject to fines assessed by Visa and MasterCard. Thus, these rules remove any independent competition among the issuing banks in the setting of interchange fees.

According to the complaint, Visa and MasterCard jointly have market power in the market for merchant acceptance of credit and debit cards in the United States. Visa has a 47 percent share of the dollar volume of credit card transactions in the United States, while MasterCard has a 26 to 28 percent share of the credit card market. Moreover, Visa and MasterCard combined comprise over 80 percent of all debit purchase volume. Consequently, Visa and MasterCard have used their market power to impose default interchange fees and competitive restraints on merchants.

The merchants assert claims for violations of Section 1 of the Sherman Act. The action seeks treble damages, pre- and post-judgment interest, costs of suit, attorney fees, and any other just and proper relief.

This suit comes on the heels of similar suits filed in the past seven months against Visa and MasterCard by a group of restaurants, by Google, by another group of similar merchants, and by T-MOBILE.

The case is No. 2:15-cv-00711.

Attorneys: Richard E. Norman (Crowley Norman LLP) for BSN SPORTS LLC, Kwik Trip, Inc., ADFP Management Inc., Citi Trends, Inc., Allsup's Convenience Stores, Inc., RaceTrac Petroleum, Inc., Quick Chek Corporation, QuikTrip Corporation, QuikTrip West, Incorporated, Wawa, Inc., and Waffle House, Inc.

Companies: : BSN SPORTS LLC; Kwik Trip, Inc.; ADFP Management Inc.; Citi Trends, Inc.; Allsup's Convenience Stores, Inc.; RaceTrac Petroleum, Inc.; Quick Chek Corporation; QuikTrip Corporation; QuikTrip West, Incorporated; Wawa, Inc.; Waffle House, Inc.

News: Antitrust TexasNews