Visa & MasterCard Return Merchants’ Fire

BROOKLYN (CN) – Visa and MasterCard sued nationwide grocers, convenience stores, restaurants and pharmacies as the opt-out period for two class actions expired, insisting it did not violate antitrust laws, and if it did, it settled.
     Dozens of major retailers sued Visa and MasterCard last week in Manhattan Federal Court, claiming the two dominant credit card companies colluded to impose virtually identical rules on banks, stifling competition and forcing merchants to pay millions of dollars in exorbitant “swipe” fees.
     On Friday, Visa, MasterCard and six major banks sued the National Association of Convenience Stores et al., seeking “a declaration that from January 1, 2004 to
     November 27, 2012 (the ‘Damages Period’), the time period for which the defendants may, as opt-outs, seek damages under the Interchange Settlement, Visa’s and MasterCard’s conduct in, among other things, continuing to set their respective ‘default interchange’ rates, maintaining their respective ‘honor all cards’ rules, enforcing their respective rules relating to merchants (‘Merchant Rules’), and restructuring themselves did not violate federal antitrust law or the antitrust laws of the several States or the District of Columbia.”
     The opt-out deadline was Tuesday, May 28, according to Visa and MasterCard’s complaint.
     The complaint states: “Plaintiffs bring this action for declaratory judgment pursuant to 28 U.S.C. § 2201 to resolve disputes that have embroiled certain of the parties, and this Court, in antitrust litigation for almost twenty years and that have outlasted two settlements. On November 27, 2012, this Court preliminarily approved the second of these settlements (the ‘Interchange Settlement’) in In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, 05-md-1720 (E.D.N.Y. Nov. 27, 2012) (Gleeson, J.) (Orenstein, M.J.) (the ‘Interchange Fee Litigation’) and provisionally certified two nationwide settlement classes under Federal Rules of Civil Procedure (‘FRCP’) 23(b)(2) and 23(b)(3). As of the filing of this complaint, defendants, each of which was a named plaintiff in the Interchange Litigation and participated in the negotiations that led to the Interchange Settlement, have opted out or have made clear their intention to opt out of the 23(b)(3) Settlement Class before the applicable deadline of May 28, 2013. To expeditiously and finally resolve their disputes with the Defendants, who are among the most vocal opponents of the Interchange Settlement, Plaintiffs here seek” the declaration cited above.
     As the merchants claimed that Visa and MasterCard stifled competition by imposing virtually identical rules on banks that use their endorsements, the merchants may or may not find amusing a footnote to the Visa/MasterCard complaint, which states: “In this Complaint, Visa does not make any allegations as to MasterCard-related conduct and MasterCard does not make any allegations as to Visa-related conduct in support of their respective claims for declaratory judgment.”
     Visa and MasterCard’s complaint continues: “A declaration in Plaintiffs’ favor against the Defendants is necessary to prevent the continuation of endless, wasteful litigation between Defendants and Plaintiffs. In fact, the Interchange Settlement is not the first settlement between Visa and MasterCard and the merchant community. In 2003, Plaintiffs Visa and MasterCard settled the In re Visa Check/MasterMoney
     Antitrust Litigation (the ‘Visa Check Litigation’ or ‘Visa Check), in exchange for payment of a substantial sum of money. Despite that settlement, the Interchange Fee Litigation was initiated, thereby subjecting Visa and MasterCard and the Bank Plaintiffs to yet a further class action challenging essentially the same conduct.
     “In both the Visa Check Litigation and the Interchange Fee Litigation, merchants who accept Visa- and MasterCard-branded credit and/or debit cards commenced putative plaintiff class actions against Visa, MasterCard, and, with respect to the Interchange Fee Litigation, against their respective customer banks, alleging a purported conspiracy to fix interchange rates and to perpetuate Visa’s and MasterCard’s respective rules that are purportedly anti-competitive. When, in 2006, MasterCard became a public company through an initial public offering (the ‘MasterCard IPO’), merchants in the putative plaintiff class for the Interchange Fee Litigation brought additional claims alleging that the MasterCard IPO itself violated various antitrust laws. Merchants in the putative plaintiff class in the Interchange Fee Litigation brought similar claims against Visa following its 2008 initial public offering in which Visa became Visa Inc. (the ‘Visa IPO’).
     “The claims against Visa, MasterCard, and the Bank Plaintiffs in both of these litigations have included claims that they (and Visa’s and MasterCard’s other bank customers) have entered into agreements to establish default interchange rates at artificially high levels, that Visa’s and MasterCard’s respective Merchant Rules constitute unlawful restraints, and therefore that the merchant discount fees that merchants pay to acquiring banks have been artificially inflated to supra-competitive levels. The merchant and merchant trade association plaintiffs in the Interchange Fee Litigation alleged that Visa’s and MasterCard’s respective IPOs each perpetuated the same anti-competitive practices that purportedly preceded them. The Defendants herein, in making clear their intention to bring opt-out actions against Plaintiffs, intend to assert, and have in their objections to the Interchange Settlement and elsewhere suggested they will assert, essentially the same claims with respect to the Damages Period.
     “Plaintiffs have maintained, and continue to maintain, that Defendants’ claims lack merit for several reasons.
     “(i) Visa’s and MasterCard’s respective default interchange rules and the manner in which each of them established default interchange for their respective networks during the Damages Period did not violate the Sherman Act, any other federal antitrust law, or the antitrust laws of the several States or the District of Columbia;
     “(ii) Visa Merchant Rules and MasterCard Merchant Rules, each standing alone or viewed together with each network’s other such rules and/or default interchange rules, did not violate the Sherman Act, any other federal antitrust law, or the antitrust laws of the several States or the District of Columbia during the Damages Period;
     “(iii) The MasterCard IPO did not violate the federal antitrust law or the antitrust laws of the several States or the District of Columbia;
     “(iv) The Visa IPO did not violate the federal antitrust law or the antitrust laws of the several States or the District of Columbia.
     “(v) Merchants are indirect purchasers who cannot recover antitrust damages under Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977);
     (vi) There was no concerted action among the Bank Plaintiffs, Visa, MasterCard, and other of Visa’s and MasterCard’s customer banks regarding Visa Merchant Rules, MasterCard Merchant Rules, and/or the Visa and MasterCard respective interchange rules or rates during the Damages Period that could support a claim under the Sherman Act, either before or after the respective MasterCard IPO in May 2006 and Visa IPO in March 2008; and
     “(vii) The Visa Check release bars Defendants’ claims with respect to the Damages Period.”
     Visa and MasterCard’s lead counsel is Michael Shuster with Holwell Shuster & Goldberg. Co-counsel includes members of Arnold & Porter; Willkie Farr & Gallagher; Paul Weiss Rifkind Wharton & Garrison; Morrison & Foerster; O’Melveny & Myers; Skadden Arps Slate Meagher & Flom; Sidley Austin, and others.
     Here are the parties to the complaint:
     Visa U.S.A. Inc.; Visa Inc.; Visa International Service Association; Mastercard Inc.; Mastercard International Inc.; JP Morgan Chase & Co.; Chase Bank USA N.A.; Chase Paymentech Solutions LLC; JP Morgan Chase Bank N.A.; Bank of America N.A.; Bank of America Corp.; FIA Card Services N.A.; Citibank N.A.; Citigroup Inc.; Fifth Third Bancorp.; Capital One Bank (USA) N.A.; First National Bank of Omaha; Suntrust Banks Inc.; Suntrust Bank; Texas Independent Bancshares Inc.; Wells Fargo & Company; and Wells Fargo Bank N.A.
     v.National Association of Convenience Stores; Nasto Inc.; National Cooperative Grocers Association; National Community Pharmacists Association; National Grocers Association; National Restaurant Association; Affiliated Foods Midwest Cooperative; Coborn’s Inc.; D’Agostino Supermarkets Inc.; Jetro Holdings Inc.; and Jetro Cash & Carry Enterprises LLC.

%d bloggers like this: