Retailers Sue Visa & MasterCard for Collusion

     MANHATTAN (CN) – Visa and MasterCard collude to impose virtually identical rules on banks, stifling competition and forcing merchants to pay millions of dollars in exorbitant credit-card fees, dozens of major retailers claim in a federal antitrust complaint.
     Lead plaintiff Target is joined by more than 100 other plaintiffs, including Macy’s, Bloomingdale’s Staples, Marshalls, TJ Maxx, Victoria’s Secret, Kohl’s, JC Penney, Luxottica, LensCrafters and Saks.
     In the 55-page complaint, the plaintiffs claim that banks that issue credit and debit cards compete with one another to become the card of choice among consumers. Among the techniques they use are interest rates, fee schedules, and cash-back rewards.
     But “Visa and MasterCard,” the plaintiffs say, “have adopted nearly identical rules, which are agreed to by their member banks and imposed on merchants that accept cards issued by those banks.”
     “These rules, or Competitive Restraints, eliminated competition among their member issuing banks for merchant acceptance of credit cards and merchant acceptance of debit cards. As a consequence of having as members nearly all card issuers in the United States, and as a consequence of those card issuers having agreed to rules that preclude the from independently competing for merchant acceptance, Visa and MasterCard and their members have obtained and maintained market power in the market for merchant acceptance of credit cards and the market for merchant of debit cards in the United States.
     “This market power has led merchants to pay excessive interchange fees. In this manner, Visa and MasterCard have unlawfully restrained and continue to unlawfully restrain competition in these markets.”
     The principal rule the plaintiffs complaint of is Visa and MasterCard’s setting of “default” interchange fees.
     “(T)he setting of ‘default’ interchange fees effectively fixes the price of acceptance at a supracompetitive level,” the complaint states. “Plaintiffs have paid and continue to pay significantly higher costs to accept Visa-branded and MasterCard-branded credit and debit cards than they would if the banks issuing such cards competed for merchant acceptance.”
     The merchants add: “While Visa and MasterCard nominally refer to these schedules as ‘default’ interchange fee schedules, suggesting it is possible for issuing banks and merchants to gain different interchange rates by entering acceptance agreements between themselves, the Competitive Restraints prevent such agreements.”
     After a decade of fruitless attempts to fight the two defendants’ market power, the plaintiffs say, they have been forced to sue.
     If freed of the imposition of the “default” interchange fees, the merchants say, competition would result in their paying substantially less in interchange fees than they have at any time since Jan. 1, 2004.
     “Elimination of the Competitive Restraints and restoration of competitive markets for merchant acceptance would substantially reduce interchange fees, allowing plaintiffs to operate more efficiently and at lower costs, to the benefit of consumers,” the complaint states.
     “Plaintiffs operate in intensely competitive markets and would use the savings resulting from a reduction in their interchange costs to increase their competitiveness by enhancing the value their customers receive.”
     The plaintiffs seek compensatory and trebled damages, with interest for violations of the Sherman and Clayton Acts.
     They are represented by Gregory Clarick, with Clarick, Gueron & Reisbaum.

%d bloggers like this: