Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Visa seeks declaratory judgment against Home Depot in payment card interchange fee antitrust litigation, (Jan 15, 2014)

By Linda O’Brien, J.D., LL.M.

Claims by retailer Home Depot against Visa U.S.A., Inc. for allegedly conspiring with MasterCard International Corporation and their issuing and acquiring banks to fix credit card interchange fees paid by individual cardholders to the issuing banks—in violation of the Sherman Act, Clayton Act, and various state antitrust laws—have been relinquished by the retailer’s decision to opt out of a substantial class action settlement of the same claims, according to a complaint filed in the federal district court in Brooklyn, New York (In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, January 14, 2014).

A series of class actions were filed by merchants against Visa U.S.A., Inc. and MasterCard International Corporation, as well as their issuing and acquiring banks, alleging that the entities conspired to fix interchange fees and merchant discount fees by adopting and enforcing practices relating to payment cards that unreasonably restrained trade and caused injury to the merchants. Final approval of the settlement was granted in December 2013, providing for the creation of two substantial cash funds and injunctive relief in the form of various credit card network rules changes, including a modification of the “no surcharge rule.”

The complaint alleges that The Home Depot objected to the settlement class, appealed the order granting final approval of the settlement, and opted out of the settlement class in order to bring another lawsuit for the same alleged federal and state antitrust violations against Visa. Visa maintains that the setting of default interchange fees and establishing merchant rules did not violate antitrust laws and pro-competitively expanded business and retail volume for Home Depot and other merchants across the United States. It also asserts that Home Depot did not pay interchange fees, as such fees were paid by their acquiring banks. A declaration in Visa’s favor and against Home Depot is necessary to conserve judicial resources and prevent the continuation of wasteful litigation between the parties, according to the complaint.

Visa operates a network computer system to provide the daily account settlement of credit card transactions. A typical credit card transaction involves four parties: (1) the cardholder who purchases a good or service using his or her card; (2) a bank that issued the credit card (issuer); (3) a merchant who sells the good or service; and (4) the merchant’s bank (acquirer). Acquiring banks may contract with third-party processors to provide merchant processing services. The cardholder pays the gross amount of the transaction, including fees, directly to the issuer, which retains the interchange fee, passes on a separate transaction fee to the acquirer, and pass on the net transaction to the merchant via the network.

The complaint states that Visa established a set of rules designed to ensure that its payment card network functions predictably and reliably. The default interchange rules accomplish pro-competitive and pro-consumer purposes, such as establishing uniform interchange fees that remove the competitive disadvantage of small merchants to negotiate low custom interchange merchant discount fees that large merchants like Home Depot can bargain for.

Visa seeks a declaration that, from January 1, 2004 to November 27, 2012: (1) Visa’s conduct in establishing default interchange and merchant rules, or its initial public offering (IPO) in March 2008 did not violate the Sherman Act, any other federal antitrust law, or any state antitrust laws; (2) Home Depot is an indirect purchaser that cannot recover antitrust damages; (3) there was no concerted among Visa, MasterCard, or any of Visa’s customer banks regarding Visa’s interchange and merchant rules to support a claim under the Sherman Act; and (4) any claims Home Depot might assert against Visa have been released. In addition to declaratory relief, the action seeks costs of suit, and any other just and proper relief.

The case is No. 1:14-cv-00261, 05-MD-1720 (JG) (JO).

Attorneys: Richard H. Holwell (Holwell, Shuster & Goldberg LLP) and Robert C. Mason (Arnold & Porter LLP) for Visa U.S.A. Inc., Visa, Inc., and Visa International Service Association

Companies: Visa U.S.A. Inc.; Visa, Inc.; Visa International Service Association; The Home Depot, Inc.; Home Depot U.S.A., Inc.

News: Antitrust NewYorkNews