Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Visa, MasterCard manage a combination in restraint of trade, Arizona alleges, (Feb 20, 2015)
Organizations Mentioned:MasterCard Inc. | MasterCard International Inc. | Mastercard | Mastercard International, Inc. | Visa | Visa International Service Association | Visa U.S.A., Inc. | Visa USA, Inc. | Visa, Inc.
By Greg Hammond, J.D.
The State of Arizona, through Attorney General Mark Brnovich, has filed suit against financial services corporations Visa and MasterCard, alleging that the companies have and continue to manage, coordinate, and govern a combination in restraint of trade, in violation of the Sherman Act. The complaint alleges that Visa and MasterCard adopted nearly identical rules, agreed to by member banks and imposed on merchants, that eliminate competition through default interchange fees, and the Honor All Cards, All Outlets, No Discount, and No Surcharge Rules (Arizona v. Visa U.S.A., Inc., February 19, 2015).
Visa U.S.A., Inc., Visa, Inc., Visa International Service Association, MasterCard Inc., and MasterCard International Inc. have all been named defendants in the Arizona attorney general’s complaint. However, members of the supposed combination include a majority of banks and financial institutions in the United States, which issue both Visa- and MasterCard-branded credit and debit cards. According to the complaint, the restraints prevent merchants from fostering competition among issuing banks and from offering consumers the benefits of using credit or debit cards that are less costly to merchants.
Specifically, the complaint alleges that Visa and MasterCard exploited their market power in the markets for merchant acceptance of credit and debit cards by creating interchange fee schedules designed to increase the interchange fees issuing banks are able to obtain from merchants. The exercise of this market power, the Attorney General claims, has led merchants to pay excessive interchange fees.
The Attorney General also alleges that, as a result of the competitive restraints, both Visa and MasterCard have obtained and maintain market power in the United States for merchant acceptance of credit and debit cards. Arizona allegedly has paid and continues to pay significantly higher costs to accept Visa- and MasterCard-branded credit and debit cards than if Visa and MasterCard had not fixed interchange fees at a supracompetitive level and if member banks competed for merchant acceptance. Furthermore, the supracompetitive interchange fees have led to increased prices for Arizona consumers, the complaint charged.
The complaint asserts that Visa and MasterCard violated Section 1 of the Sherman Act, and that the competitive restraints, individually and in combination, constituted an illegal agreement to fix the price of acceptance of Visa- and MasterCard-branded credit and debit cards and to prevent the operation of and interfere with the competitive process with respect to merchant acceptance of Visa- and MasterCard-branded credit and debit cards.
Arizona seeks declaratory and injunctive relief, damages, costs, and reasonable attorney fees.
The case number is 2:15-cv-00309-BSB.
Attorneys: Mark Brnovich, Arizona Attorney General, for the State of Arizona.
Companies: Visa U.S.A., Inc.; Visa, Inc.; Visa International Service Association; MasterCard Inc.; MasterCard International Inc.
News: Antitrust ArizonaNews