Judge Tosses ATM Antitrust Complaints

WASHINGTON (CN) - A federal judge dismissed antitrust claims that Visa and Mastercard are "ringleaders and enforcers" in a scheme to fix ATM surcharge fees nationwide.

The opinion consolidates and dismisses three lawsuits against Visa and Mastercard, challenging fees charged when customers use ATMs other than their own bank.

One lawsuit, brought by the National ATM Council and 13 other associations in October 2011, claimed that banks "collectively have ceded power and authority to Visa and MasterCard to design, implement, and enforce a horizontal price-fixing restraint in which they are knowing participants. In short, the violation in this case is a horizontal agreement among every bank that issues Visa- or MasterCard-branded payment cards - including every principal U.S. bank - organized and supervised by the defendants as ringleaders and enforcers for the purpose of fixing the surcharge that consumers pay for ATM services."

That class - which included 350 nonbank, independent sales organizations - claimed the credit card giants forced them to charge the same transaction fee to consumers regardless of what card or network the consumers use.

While operators may charge any surcharge they wish, the surcharge must be the same for all customers - so a customer of a nonbank ATM who uses a Discover card or a STAR network card, which cost less to use, must pay the same surcharge as someone who uses a card with the Visa or MasterCard logo.

But U.S. District Judge Amy Berman Jackson ruled that the law does not support the plaintiffs' antitrust allegations, and the facts concerning a horizontal conspiracy between Visa and Mastercard are lacking.

"In this case, the complaints bristle with indignation, but when one strips away the conclusory assertions and the inferences proffered without factual support, there is very little left to consider," Jackson wrote.

"The complaint asserts that '[i]n a reasonably competitive market, ATM operators would set ATM access fees at a level reflecting the cost of obtaining the network services and other inputs necessary to complete the transaction,' and that by requiring that access fees be the same regardless of the network utilized, the 'restraints break the essential economic link that would exist in a reasonably competitive market between the price a consumer is charged for a service and the cost to the seller of providing it,'" Jackson wrote, citing one of the three complaints. "What is missing is any discussion of what the ATM operator's costs are, and whether they change if the operator uses a Visa or MasterCard network or an alternative network. Those missing facts are fundamental, and without them, there is no basis for the conclusions that the access fees are 'inflated' or 'supra-competitive.'"

Similarly, the National ATM Council's complaint fails for an utter lack of facts regarding any sort of injury - a requisite for an antitrust action - to anyone other than the consumer, according to Judge Jackson.

"Most important, the NAC complaint does not allege that Visa and MasterCard charge 'network fees' at all, much less make clear how they have been 'artificially' inflated. There are no allegations that indicate that Visa and MasterCard ask the ATM operators - or anyone else - to pay anything, what the fees might be, how they are calculated, how and when they are paid, or who pays them. Similarly, the complaint does not include the fact that Visa and MasterCard pay 'compensation to ATM operators' at all, much less any facts that would support the inference that it is 'inadequate,'" Jackson wrote.

She also rejected allegations that even though Visa and Mastercard are no longer bank-owned, financial institutions still hold positions of power and pull the strings at the two companies.

"Plaintiffs' allegations that banks today have some equity interest in and hold some seats on the boards of Visa and MasterCard also do not provide factual support for the conclusion that banks are engaged in a horizontal conspiracy to restrain trade," Jackson wrote. "Vague allegations that banks 'hold non-equity membership interests' in Visa and MasterCard subsidiaries and 'the largest among them also hold equity interests and seats on [their] boards of directors' does not show that banks control Visa and MasterCard."

She added: "Furthermore, the complaints allege no facts to suggest the existence of either an actual or a tacit agreement among banks to restrain trade by individually agreeing to the Visa and MasterCard agreements. At most, plaintiffs allege that ATM operators - both banks and independent operators - make independent business decisions whether to participate in the Visa and MasterCard networks. A statement of parallel conduct alone, without factual allegations to plausibly suggest an illegal agreement, is not enough."

Jackson declined to consider the lawsuits' state law claims, given the failures of the federal actions. However, she offered the plaintiffs another chance to plead their cases through amended complaints.

"The court has not concluded that plaintiffs could never make factual allegations to support their claims; it simply rules that plaintiffs have not done so here," Jackson concluded.

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