Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Supreme Court agrees to review Visa, MasterCard price fixing suit, (Jun 28, 2016)

By Greg Hammond, J.D.

The U.S. Supreme Court has granted review of a decision entered by the U.S. Court of Appeals in Washington, D.C., which revived price fixing claims that were brought against Visa, MasterCard, and affiliated banks by automatic teller machine (ATM) operators, as well as consumers who purportedly paid excessive fees when using these machines. The appellate court had concluded that, even where a member of a conspiracy appears to sever ties with other co-conspirators, there is no withdrawal if that member continues to support or benefit from the agreement (Visa Inc. v. Osborn, Dkt. 15-961) and (Visa Inc. v. Stoumbos, Dkt. 15-962).

ATM operators and consumers challenged Visa and MasterCard rules prohibiting an ATM owner’s imposition of a higher access fee for transactions processed on Visa’s or MasterCard’s respective ATM network than for transactions processed on another ATM Network. In addition, the ATM operators and consumers claimed that each rule was the product of a purported conspiracy, in violation of Section 1 of the Sherman Act.

The district court concluded that the plaintiffs failed to allege essential components of standing, and also that they had failed to allege an agreement in restraint of trade cognizable under the Sherman Act.

The appellate court disagreed, finding that the district court abused its discretion when it found that the plaintiffs offered a "protracted chain of causation," requiring dismissal, and erred when it concluded that the plaintiffs failed to plead adequate facts to establish standing or the existence of a horizontal conspiracy.

In particular, the plaintiffs had alleged that the rules insulated the Visa and MasterCard networks from price competition from other networks. This insulation, according to the court, yielded higher profits for Visa and MasterCard, potentially to the detriment of consumers and independent ATM operators. Moreover, there were factual details that supported the alleged causal link between the rules and economic harm.

The plaintiffs also alleged a horizontal agreement to restrain trade that sufficed at the pleadings stage, according to the appellate court. Although the rules were adopted when both Visa and MasterCard were owned and operated as joint ventures by a large group of retail banks and these member banks later relinquished direct control over the bankcard associations, the rules remained intact. The appellate court rejected the defendants’ contention that any conspiracy would have ceased when the banks relinquished direct control over the bankcard associations through public offerings. Even where a member of the conspiracy appears to sever ties with other co-conspirators, there is no withdrawal if that member continues to support or benefit from the agreement, the court explained. Moreover, whether there was an effective withdrawal from a conspiracy was typically a question of fact left for a jury.

The question presented by the Petitioners, in both the Osborn and Stoumbos petitions, was whether allegations that members of a business association agreed to adhere to the association’s rules and possess governance rights in the association, without more, are sufficient to plead the element of conspiracy in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, as the Court of Appeals held below, or are insufficient, as the Third, Fourth, and Ninth Circuits have held.

Attorneys: Boris Bershteyn (Skadden Arps Slate Meagher & Flom LLP) and Anthony J. Franze (Arnold & Porter LLP) for Petitioners. Steve W. Berman (Hagens Berman Sobol Shapiro LLP) for Respondents.

Companies: Visa Inc.; MasterCard Inc.

News: Antitrust