Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Merchants allege Visa, MasterCard conspired with member banks to charge supracompetitive fees for payment card acceptance, (Aug 14, 2013)
Organizations Mentioned:Delta Air Lines | Delta Air Lines, Inc. | MasterCard Inc. | Mastercard | Nix, Patterson & Roach, LLP | Visa | Visa, Inc.
By Tobias J. Gillett, J.D., LL.M.
A group of merchants has filed suit in the federal district court in Marshall, Texas alleging that Visa and MasterCard colluded with their member banks to impose rules on the merchants that suppressed competition between the banks for merchant acceptance of their credit and debit cards, causing the merchants to pay supracompetitive fees to the banks (Delta Air Lines, Inc. v. Visa, Inc., filed August 13, 2013).
According to the merchants’ complaint, Visa and MasterCard have “manage[d], coordinate[d], and govern[ed] a combination and conspiracy in restraint of trade” pursuant to which each of their member banks “has agreed not to compete for merchant acceptance of the credit and debit cards that it issues.”
One of the ways banks earn income on credit and debit cards is through interchange fees, or “fees imposed on merchants by Visa and MasterCard for the privilege of accepting the issuing bank’s card from a consumer as a means of payment.” However, although banks compete with each other to issue credit and debit cards to consumers, the member banks have each agreed to impose rules on merchants that accept their cards which “eliminate competition among [the] member banks for merchant acceptance of credit cards and debit cards,” causing “merchants to pay excessive interchange fees.”
The complaint identifies five principal “competitive restraints” imposed on merchants, including “the setting of ‘default’ interchange fees, the Honor All Cards Rules, the All Outlets Rules, the No Discounts Rules, and the No Surcharges Rules.” The complaint alleges that the setting of default interchange fees constitutes price fixing for purposes of the Sherman Act, “because the other competitive restraints remove any independent competition among issuing banks in the setting of interchange fees.”
Under the Honor All Card Rules, merchants that accept any Visa or MasterCard credit cards, or any Visa or MasterCard debit cards, must accept all such credit or debit cards, without regard to the bank issuing the card or the card type, precluding merchants “from gaining the benefits of competition as to the terms upon which they will accept or reject the cards of any issuing bank.” The All Outlets Rules require merchants accepting Visa or MasterCard payment cards to accept those cards at all of their merchant locations. Under the No Discounts Rules, merchants may only offer discounts to customers who pay in cash, rather than using a payment card. The No Surcharge Rules prohibit merchants “from surcharging transactions in which a consumer used a Visa-branded card or a MasterCard-branded card.” Each of these rules allegedly prevents merchants from ‘gain[ing] the benefits of competition as to the terms under which [the merchants] would accept an issuing bank’s cards, including the amount of interchange fees.”
The complaint alleges that Visa and MasterCard possess market power in the market for merchant acceptance of general purpose credit cards in the United States, with high barriers to entry preventing other competitors from entering the market. This market power has allegedly permitted Visa and MasterCard to impose the competitive restraints on the merchants.
The complaint asserts claims for violation of Section 1 of the Sherman Act through Visa and MasterCard’s competitive restraints governing credit and debit cards. The complaint seeks actual damages for acts and omissions occurring before November 27, 2012; treble damages; attorneys’ fees; costs of suit; and pre and post judgment interest.
The case is No. 2:23-cv-00621-JRG-RSP.
Attorneys: Jeffrey J. Angelovich (Nix, Patterson & Roach, LLP) for Delta Air Lines, Inc.
Companies: Delta Air Lines, Inc.; Visa, Inc.; MasterCard Inc.
News: Antitrust