No April Fool’s Day Joke: Visa and MasterCard are Set to “Adjust” Interchange Rates on Tuesday (April 1st)

Visa and MasterCard Interchange Rates Revised on April 1

“Visa Under Kroes Focus” (via New Europe)

Click here to read the New Europe – The European Weekly profile on Neelie Kroes, European Commissioner for Competition Policy

Is Citigroup’s Credit Card Business Restructing an Attempt to Hedge Bank from Antitrust Liability?

Call it what you want, but the attempt by Citigroup Inc. to restructure it’s credit card business could be nothing more than a scheme to protect the bank from its multi-billion dollar merchant interchange credit card liability.  Just as MasterCard and Visa sought to distance itself from the interchange antitrust price-fixing complaint, the litigation is based on transgressions dating back years.

Just as with MasterCard and Visa’s new shareholders, the question for Citi is who will be left holding the interchange woes as part of the consumer restructuring?  Is the consolidation of its worldwide credit card businesses, run by Steven Freiberg, CEO of Global Cards, an attempt to distance the bank of its alleged liabilities?  If investors could pump billions into a questionable Visa Inc IPO, will anyone even notice what seems like a shell game to cast off what could end up drowning the bank?

This summer, the 1960’s television sitcom, “Get Smart” is making its theatrical release.  What might this have to do with Citi’s restructuring?  Everything.  To paraphrase the ongoing joke in “Get Smart,” ah, the old A, B, C way to spin off their business trick. Today’s news of the restructuring of its credit card business might be followed by similar attempted liability escapes by other banking giants.  From our prospective, this has more to do with the old adage of how to raise money and hedge your risks.  As the story goes, there are three types of investments for betting on new oil wells. “Type A” – a sure thing – is where you know that oil is in the ground, it is seeping out of the surface — you are swimming in the stuff and that is where you personally invest along with your closest friends and family members. “Type B” – we’ll, we’re in Texas and there’s just got to be oil here – is when there might be oil, but you have to drill and explore; this is where you get the neighbors and distant friends to go along.  And, “Type C” – throwing darts at a map – is where you haven’t a clue; this is where “investors” risk the capital. With a multi-billion dollar antitrust price-fixing class action threatening the core of Visa, MasterCard and its thousands of member banks’ merchant Interchange revenue stream, what better way to hedge your investment than to split off the impending liability? 

More about the Lead Plaintiffs

For those not following our ScanMyPhotos.com Ecommerce Blog, Tales from the World of Photo Scanning, we did a posting earlier today that mentions the credit card antitrust litigation.  Click here.

“Is Visa Worth the Price?” (via Motley Fool)

Click here to read the March 27th Tom Hutchinson article in The Motley Fool on Visa.

Excerpts:

• “But my opinion, Visa also faces two huge risks. The first is litigation; the company set aside $3 billion of the more than $17 billion raised on the IPO to cover pending lawsuits over the amount it charges merchants. It could wind up needing a lot more.”

“BRC Anticipates Victory As Visa Card Iinvestigation Launched” (via The Retail Bulletin)

Click here for more info on the British Retail Consortium’s comments regarding the newest Visa interchange fee investigation

“EU Opens Inquiry Into Visa Europe’s Payment-Card Fees” (via Bloomberg)

Click here to read the Mach 26 Bloomberg article by John Rega.  EU regulators are investigating whether Visa is involved with price-fixing its cross border fees.

Excerpts:

• “European Union antitrust regulators opened a probe of fees set by Visa Europe Ltd.”
• The European Commission is looking into Visa Europe’s merchant interchange fees, this after the previous 5-year settlement agreement had lapsed in December, where Visa had agreed to lower interchange fees from 1.1% to .7% [the average rate in the U.S. is 1.7%, with an expected pricing change set for April 1st].
• “EU Competition Commissioner Nellie Kroes has likened the fee to an unfair tax. The investigation opens the way for an overhaul of the industry after the EU agency ordered MasterCard to change how it sets its interchange fee Dec. 19.”

WayTooHigh.com: Influencing Opinions and Raising Awareness

Today marks the third year since ScanMyPhotos.com launched WayTooHigh.com – The Credit Card Interchange Report. It is also about the time we received that infamous rate increase letter from Chase Paymentech which was sent to millions of merchants just like us.

Some rates have risen more than 300% in the past few years. The most recent rate “adjustment” letter arrived days ago, but does not identify the new fees until after they take effect. That sympathetic letter from our payment processing service announced a rate increase when cardholders had us process their affinity, frequent-flier signature cards; a quality causing retailers to effectively also be taken on a ride. That was the letter which led to The Wall Street Journal front-page Marketplace profile on our parent company [30 Minute Photos Etc.] and the beginning of our Federal class-action complaint against Visa, MasterCard and international major banks.

Changes have occured over the years. Merchant interchange rates have continued to ascend, while our traditional photographic film business wallowed due to the same technological shifts which made digital more practical.  These are the efficiencies which also helped bring down many antiquated analog services.  Next to film, the yellow page directories, fax machines and thousands of other businesses, the changing times also drew attention to the $40 billion annual merchant interchange debacle which didn’t budge.

But, unlike other businesses that were forced to change, the two giant credit card associations and their 80% market power kept trudging along.  Today, film, phone books and other once shining business models are historic vestiges from an antiquated past.  However, the electronic payment network, which today is super-fast, efficient and liberated from the days of manual credit card imprinters and carbon-copy receipts (that had to be mailed away for processing) remains.When you study the free interchange processing for checks, and international interchange rates that are a third and less the cost in the U.S., you quickly understand that Visa and MasterCard’s game – managed by thousands of member banks – is blemished.  Their anti-competitive price-fixing is illegal and drawing international attention and loud shouts from Washington D.C.

While this website has been written in our voice, as a retailer who best understands the issues, we have also become the leading personality and fixture behind the interchange battle.  And, it continues to gaining traction.  Visa and MasterCard restructured their companies, but the issues and fees remain as do their potential liability.The mix of banks, public relations and legal firms which read our comments each day is shared with close scrutiny by Visa, MasterCard, and much more importantly by other business owners, governments and associations around the world.  From giant multi-national conglomerates to “mom-and-pop” shopkeepers, we have been reporting, sharing commentary and observations with the world community which is also causing grief to Visa and MasterCard.  WayTooHigh.com and the nearly fifty other class-actions suits after we filed the first are shining a knock-down message that time is running out on the cartel’s imposing might.

Many of you have been following the shift in our business too – from film to digital and our extraordinary international media coverage for the new super-fast photo scanning business model we pioneered. From multiple articles in The New York Times, The Wall Street Journal, USA Today and scores of other media coverage, the entrepreneurial passions at ScanMyPhotos.com was successful in making the leap from analog to digital. So, why hasn’t Visa and MasterCard also transitioned from an ancient , cost-based interchange fee structure to one that represents today’s technological realities?

In the late 1980’s technology evolved where transactions were processed electronically and paper records were not needed for most payment card transactions.  Since that time, the costs of various components of credit card transaction processing (phone, data processing and Internet services have decreased significantly.  These changes led to significant reductions in the costs of processing payment card transactions.

As class-representatives, on behalf of the millions of merchants with shared dedicated to eradicating supra-competitive interchange fees, we will continue to engage and call attention to this multi-billion dollar injustice.

News Update From ScanMyPhotos.com

Why Visa Inc. Stock Is Falling Today

Although it is only speculation and our opinion, due to the triple digit market rise on Monday and Visa’s several point fall, it seems that investors are finally warming to the reality of why the bank’s unloaded nearly half their investment in the giant credit card association.

Four months ago, WayTooHigh.com – The Credit Card Interchange Report began posting several advisories on the planned Visa IPO.

This is the most popular recent link, which identifies in Visa’s own words why the world’s largest retail electronic payments network may be more than risky. 

• “Visa’s IPO Is Worth a Close Reading” (via WSJ)
• What is the Federal Reserve’s Role in the Visa IPO?
• How the Fed’s $200-Billion Intervention Indirectly Boosts Visa’s IPO Valuation
• Why Should The Public Bail Out Visa and the Banks?
• Visa Inc. Files 10-K Annual Report, Amends S-1 Registration
• “Visa: Bailing Out The Banks” (NY Times)
• “Should You Join the Visa IPO Craze?” (via Charlotte Observer)
• Visa Inc. IPO Largest in US History; First it was 5, then 10 and Now $18.8 Billion – That’s Some Rich Valuation Appreciation
• Visa’s Inc’s $10,000,000,000 Misguided Hedge From Litigation (WayTooHigh.com)
• Understanding the Word “Insolvency” Is Crystal Clear
• Thousands of Banks Pin Hopes on Visa Inc. to Bail Them Out
• “Significant Victory” Announced Against MasterCard by Class Plantiffs

Want to know more about lead plaintiff ScanMyPhotos.com? Click here and read their daily blog: Tales from the World of Photo Scanning

“Credit Card Stocks: Is This Little Known Bill Going To Ring In The Next Banking Crisis? (via Today’s Financial News)

Click here to read the March 23 posting by Laura Cadden on Today’s Financial News.

Excerpts, interview with Andrew Snyder:

• ” Right now, the Free Credit Fee Act could hurt them. There’s a thing called interchange fees, and it’s what companies like Wal-MartAllen-Questrom-Q-A and Target, the fee the credit card companies are charging them. Sometimes it’s 3 percent and 6 percent, but it’s a percentage of the total of whatever you’re paying them. There’s a bill in Congress right now to try to make it so the credit card issuers have to negotiate that fee, which could eventually hurt their revenues pretty largely.”

“[Israeli] Regulator Seen Ruling Against Banks On Collusion: An Antitrust Authority Ruling Can Be Used In A Civil Action Against The Banks On Fees (via Trading Markets)

Click here to read the March 21, McClatchy-Tribune Information Services article.

Excerpts.

• “[Israeli] Antitrust Authority director general Ronit Kan today notified the five big banks the she plans to issue a civil ruling that executives shared information on bank fees.  A civil ruling serves as evidence for civil suit, which means that the public can use the ruling in a civil suit against the banks. A similar ruling was used in a class-action suit against the banks over the sharing of information.”

• “The [Israeli] investigation is focusing on suspected collusion on bank fees and interest, as well as activities of banks’ subsidiaries, including their credit card companies.”

“Retailers: Card Fees Too High” (via Times Union)

Click here to read the March 22 article by Alan Wechsler in the Times Union.  

[Of note is that the bank's along with Visa and MasterCard's proxy, Trish Wexler at their Electronic Payments Coalition advocacy group  explained in the article that "Credit card companies say government has no right to get involved."  This probably was the same argument the robber barons voiced in the 1800s when the railroad owners forced farmers to pay whatever they demanded to transport their goods to market. Interchange fees are just as antiquated and were designed a generation ago to process four-party payments over the Visa and MasterCard network, back when we merchants used manual credit card imprinters and carbon copy receipts.  As for Ms. Wexler, this is why we have the Sherman Antitrust Act, because Washington listened.  The goal of WayTooHigh.com - The Credit Card Interchange Report is to derail the banks' arrogance.] 

Excerpt:

• “There’s growing retailer resentment over the fees Visa and MasterCard charge for using their cards. More than 40 years after the cards were first introduced, nine states, including New York, along with the federal government, are pushing for laws to control the power credit card companies have over businesses.”
• “It’s really out of control,” said Mallory Duncan, senior vice president and general counsel at the National Retail Federation, a trade group in Washington, D.C. “The rates keep going up, the terms are horrendous and it’s a cost that retailers and their customers have to bear.”

Want to know more about lead plaintiff ScanMyPhotos.com?  Click here and read their daily blog: Tales from the World of Photo Scanning

“Visa’s IPO Is Worth a Close Reading” (via WSJ)

Herb Greenberg reports in The Wall Street Journal on March 22 [Page A11, subscription required] on what we have long been mentioning - The Visa IPO risk factors. 

Unfortunately, it wasn’t until after the drunken jubilation subsided that investors are beginning to understand what is at stake.  We posted the Visa Inc. SEC filing and risk factors on Dec 22.  Why was the media as negligent as investment advisers and underwriters in better not explaining the facts behind the largest IPO in our nation’s history?  Was it greed, or the rush to get the deal done at all costs.  Now that the party is over and that window of opportunity to complete the IPO is sealed, sobriety comes in a few weeks, when the billions in Federal Reserve loans are called.   

Click here to read the Herb Greenberg WSJ article.

Excerpts:

• “Investors generally overlook “risk factors,” as they are called. These can be found in all IPO prospectuses and 10-K annual reports filed with the Securities and Exchange Commission. This is where the company is supposed to bend over backwards to tell you where the booby traps might be.”
• “Much of it is boilerplate, but Visa’s warnings go beyond mere boilerplate to some specific issues that could very well spook investors if and when they ever make it into the headlines.  Consider, for example, that the first eight pages of its risk factors are devoted to legal and regulatory matters. Most companies usually start with business risks, but with Visa — and MasterCard — the lawyers (and some politicians) have had a field day.  Perhaps the stickiest concern has to do with lawsuits, as Visa puts it, over the amount of money the credit-card companies charge merchants.”
  
• What is the Federal Reserve’s Role in the Visa IPO?
  
• How the Fed’s $200-Billion Intervention Indirectly Boosts Visa’s IPO Valuation
  
•  Why Should The Public Bail Out Visa and the Banks? 

Visa Inc. Files 10-K Annual Report, Amends S-1 Registration
key point: “Failure to successfully defend or settle the interchange litigation would result in liability that to the extent not covered by our retrospective responsibility plan could have a material adverse effect on our results of operations, financial condition and cash flows, or, in certain circumstances, even cause us to become insolvent.” 

“Visa: Bailing Out The Banks” (NY Times)

“Should You Join the Visa IPO Craze?” (via Charlotte Observer)

Visa Inc. IPO Largest in US History; First it was 5, then 10 and Now $18.8 Billion – That’s Some Rich Valuation Appreciation

Visa’s Inc’s $10,000,000,000 Misguided Hedge From Litigation (WayTooHigh.com)

Understanding the Word “Insolvency” Is Crystal Clear

Thousands of Banks Pin Hopes on Visa Inc. to Bail Them Out

“Significant Victory” Announced Against MasterCard by Class Plantiffs

 Want to know more about lead plaintiff ScanMyPhotos.com?  Click here and read their daily blog: Tales from the World of Photo Scanning

Whatever Happened To Interchange Fee Limits at Service Stations?

Although we will not talk directly with any of the named defendants in the merchant interchange litigation, we are using this forum to ask this question of others.

 MasterCard announced an initiative to limit the merchant interchange fee at service stations to $50 per transaction. The question is whether this ever actually was implemented?  Did Visa follow along?  And, if the giant credit card associations did limit the fees at the pumps, why not for all items, as we think the cost to transact a one-dollar or five-thousand dollar electronic payment on the MasterCard and Visa network should be about the same.

Click here for more info.

“More Americans Using Credit Cards to Stay Afloat” (via USA Today)

Click here to read the USA Today article by reporter Kathy Chu.

Excerpts:

• “As the economy has worsened, card issuers have become more selective about offering credit to new customers, and in a growing number of cases, are shrinking card holders’ credit limits. Yet they’re still sending more solicitations to existing credit card customers. In 2007, issuers increased their solicitations to existing customers by 15.6%, advertising rewards and other perks to promote spending, according to Mintel, a firm that tracks such mailings.”

• “Subprime customers — among the most profitable for banks because of the high rates and fees on their cards — saw a 41% jump in direct-mail credit card offers in the first half of 2007, the latest period for which figures were available, compared with the same period the year before, Mintel found.”

“Lenders Labeled New Marketing Villains”(AdAge)

Click here to view the March 10th AdAge article by Matthew Creamer  (Subscription required).

Excerpt:

• “Debt: It’s the new obesity. Just as food companies have gotten spanked for pumping their products full of fat and sugar, companies that spend big to market credit cards and add more flab to the already-chunky financial waistlines of Americans are coming under increasing fire from politicians, consumer advocates and customers feeling burned by their monthly statements.”
• “Just as food companies have gotten spanked for pumping their products full of fat and sugar, companies that spend big to market credit cards and add more flab to the already-chunky financial waistlines of Americans are coming under increasing fire from politicians, consumer advocates and customers feeling burned by their monthly statements.”

Visa and MasterCard: Redesigning the Credit Card Slips

Sell advertisements on all credit and debit card receipts.

Today’s advanced technological innovations enable personalized printing on nearly everything, so how about on credit card receipts too? 

As Visa and MasterCard are regular readers of WayTooHigh.com – The Credit Card Interchange Report, it will be interesting to see how they respond.

As merchants continue to question and fight the nearly $40 billion paid out through interchange fees each year, this is a smart solution to remedy some of the issues. 

Advertisements that are customized and adjustable can be printed on the charge receipts with the same ease as posting the exact merchant interchange fee right above it, on the paper that cardholders receive with their purchases.  This way, retailers and cardholders know exactly what they are paying for interchange fees, just as they see the separate sales tax line item on all receipts.

Click here for more info.

Riddle: What’s The Difference Between The Cost To Send An Email And An Electronic Payment? $40 billion each year!

Interchange Fees: Casualties of Technology?

Seventy-two pages, five-pages or one line?

Why Not Post Exact Interchange Fee on Receipts?

Visa and MasterCard’s Solution to Record Gas Prices

Welcome new Visa Inc. shareholders! 

Did you know that your company is reaping windfall profits from our nation’s energy crisis? 

Whether you drive a Humvee or a Prius, the two leading credit card associations’ member banks are reaping a percent, more like two-percent from your tank’s fill-ups.  Swipe your credit card at the service station and nearly $2.00 from every fill-up goes to Visa and MasterCard’s member banks and some back to them too. 

This is the credit card interchange fee quandary. 

How can they justify the $40 billion in annual interchange fees?  Back when housing industry’s prices were soaring, even Realtors cut deals and lowered their commissions.  So, why, now that gas prices are at record levels are the banks and Visa + MasterCard still reaping windfall profits? 

When you swipe your card at the pump, the cost to electronically process your transaction are pennies.  Why then are you paying dollars in interchange fees?

Banks Should Study “Moore’s Law” To Reverse Unbridled Fee Increases

Summary: Briefing on Interchange Issues

Record Breaking IPO Today and Record Number of WayTooHigh.com Visits

Visa Inc. $45 Billion Market Value Still $5 Billion Under Potential Liability

[Click here for March 19, AP story on Visa Inc. IPO by Michael Liedtke]

Based on Visa Inc’s. closing stock price after its first day of trading (down by more than 12-points from its intra-day trading high of $69 a share), the giant credit card association’s market value is about $45 billion.  The stock was up just $1.50 a share from its trading-day low of fifty-five dollars.  Even so, the credit card cartel’s valuation is still $5 billion shy of the reported $50 billion potential  legal liability, according to Legal Times.  As with MasterCard, the antitrust liability could lead to the company’s insolvency, according to Visa’s SEC filing.

While Visa might be somewhat insulated from credit problems facing the banks, which still own nearly half the company, they along with MasterCard are very much in the cross-hairs of the merchants who are forced to accept the card cartel’s dominant 80% market power. 

Even as a new group of owners join the thousands of member banks by stepping onto the field, the years of antitrust price-fixing charges remains with the new and prior owners.

“Why the Visa IPO is So Hot” (via MSN: MoneyBlog)

Click here to read Anthony Mirhaydari’s report in MSN’s MoneyBlog)

Excerpt:

• “…And there are some legal issues too: Since 2003, for every dollar of revenue Visa generated, 28 cents was paid out in settlements. Most of the litigation centers on the interchange rates Visa charges to merchants on each transaction and various other antitrust issues.”

Updated Visa Inc. (V) NYSE Stock Information

Click here

Shareholders Take Visa; Banks Run With $10,000,000,000 Payday

Because the new Visa Inc. shareholders remain hypnotised by the market success of MasterCard’s IPO, here are some leading morning-after profiles about why the banks bailed on Visa, cashed out $10 billion, plus another $3 billion for litigation reserves. 

Visa is the richest IPO ever in U.S. history, but for who?

Did you know that the initial initial public offering was expected to yield only $5 billion?  And, after deducting the legal reserves, the banks and the underwriters proceeds that is about all that might be left.

“At Stake is More Than $50 Billion if the Merchants are Successful” (Legal Times)

Visa Inc. IPO Valuation – $74 a share?

“[B]anks Also Stand to Shed Some Liability” (The Charlotte Observer)

“Visa’s Lucrative House of Cards” (SF Chronicle)

Twilight Zone: The Movie, Visa and MasterCard Style

UnfairCreditCardFees.com

Visa Inc. IPO Largest in US History; First it was 5, then 10 and Now $18.8 Billion – That’s Some Rich Valuation Appreciation

“Significant Victory” Announced Against MasterCard by Class Plantiffs

 “Visa’s initial offering expected to fetch $5-billion“

Visa’s Inc’s $10,000,000,000 Misguided Hedge From Litigation

“Visa’s IPO Use of Proceeds Plan and Interchange Overview

Visa Inc. Files 10-K Annual Report, Amends S-1 Registration

How the Fed’s $200-Billion Intervention Indirectly Boosts Visa’s IPO Valuation

“Will Visa IPO Deter Antitrust Lawsuits?” (Financial Week)

“IPO View – Visa IPO Hit by Unexpected Snag–Recession Fears” (Reuters)

—————————————————————– 

Want to know more about lead plaintiff ScanMyPhotos.com?  Click here and read their daily blog: Tales from the World of Photo Scanning

“Credit Card Stocks: The Credit Card Fair Fee Act May Kill The Interchange Fee… And Credit Card Company Revenues” (via Today’s Financial News)

Click here to read the Andrew Snyder article in Today’s Financial News

Excerpt:

1. “…Instead, Washington wants to uncover the secretive fees most consumers know nothing about. After all, these “interchange fees,” which are the fees credit card companies charge vendors for the ability to accept and process their cards, cost Americans (even those that pay with cash) more than $42 billion last year.”
2. “When you and I complain to our elected representatives, chances are, little action will be taken as a result of it. But when political and economic powerhouses like Wal-MartAllen-Questrom-Q-A and Target pick up the phone, Capitol Hill starts to move. That is why MasterCard shareholders and future Visa shareholders need to pay attention. If Washington (or should I say Wal-Mart and Target) gets its way, credit card industry revenues will be slashed.”

Visa prices IPO at $44 a share, above expected range, raising a record $18 billion

The lessons of greed by leading financial institutions have not been learned – click here.   

A funny thing happened on the way to “Vegas,” for those readers of the earlier posts, including ["If We Were in Vegas, Our Wager Would Be on Visa’s IPO Not Happening,"]. 

Several weeks ago we began raising the question of whether the Visa IPO would be delayed or derailed.  After the most recent financial market earthquakes, we opined for the latter and with good reason.  We strongly felt that investors would be more risk adverse, pay closer attention to the IPO risk factors and analyze the banks’ need to bail out from Visa. 

However, the historic moves within the past 48-hours by the Federal Reserve by adding liquidity, covering the Bear Stearns takeover and announcing new protocols to lower key interest rates all helped temporarily prop up the financial markets.  Perhaps just long enough to keep the IPO window open for Visa’s thousands of member banks to run for the hills. 

WayTooHigh.com – The Credit Card Interchange Report will be closely monitoring and updating the events of the next few days and beyond.

————————————————————– 

Want to know more about lead plaintiff ScanMyPhotos.com?  Click here and read their daily blog: Tales from the World of Photo Scanning

“Visa Set to Charge” (via Brifing.com)

Click here to read the Jeffrey Ham report in Brifing.com

Excerpts:

1. “While many companies use the proceeds of IPOs to build their balance sheet and fund expansion, Visa is using $3 billion of the capital raise to fund litigation expenses.  Both Visa and peer MasterCard (MA) have been hit with lawsuits related to interchange fees charged to merchants for card transactions.”
   
2. “Those interchange fees fuel Visa’s and MasterCard’s profit engine.  Neither company issues credit or cash to consumers.  Rather, they process the transaction and charge merchants a fee for conducting the sale.”

Anatomy of Price Increases: Visa and MasterCard vs. ScanMyPhotos.com

As owners of a California-based retail business and nationwide Ecommerce company, ScanMyPhotos.com would never send the following message:

We are adjusting our fees, but will not let you know the new rate schedule and how it will impact your wallet until the day it takes effect and you will not see the price change until your subsequent monthly invoice. 

However, that was the collective message on behalf of Visa and MasterCard that was received in mid-March by millions of merchants. 

Last week, ScanMyPhotos.com did share a notice about a necessary price change to one of our services.  Before we broadcast the change, we consulted with customers, including one of our greatest fans, Jefferson Graham, tech reporter at USA Today. Jeff voted by saying good for us in raising the rate because charging just $99.95 for our prepaid fill-the-box photo scanning service, which includes all free shipping and same day service was way too low.  Even at the planned increase to $124.95 for our prepaid photo scanning boxes, the rate, according to Jeff is too low. It is hundreds less than the competition; many of whom launched their services by copying our 17-year-old business model and in reaction to us actually pioneering the super-fast photo scanning.

Either way, our price increase is not anti-competitive. We do not operate like the monopoly masqueraded under the Visa and MasterCard brands. Anyone can enter our industry and since we launched ScanMyPhotos.com as a division of 30 Minute Photos Etc. many have. Our prices are so low that nearly 90% of our orders come from outside California. Rather than like our flat-rate photo scanning service, where you can have upwards of 1,800 4×6″ pictures scanned to DVD and mailed back the same day, MasterCard and Visa’s Interchange fee pricing scheme charges a percent for each transaction when credit cards are processed on their electronic network.Although ScanMyPhotos.com has scanned millions of pictures (we recently digitized our 6-millionth photo), consumers can choose to use us or not. But, one thing is certain: if we choose to not accept Visa or MasterCard we would be out of business – instantly. With an 80% market power, there are no hearty choices and there is no tangible competition.Want to know more about lead plaintiff ScanMyPhotos.com?  Click here and read their daily blog: Tales from the World of Photo Scanning

Federal Reserve 3/4-Point Interest Rate Cut

The Federal Reserve slashed a key interest rate by three-quarters of a point, to 2.25%, a substantial cut but smaller than many in financial markets had expected.

Last Call: Will the Visa IPO Sequel MasterCard’s Euphoria?

Like with motion pictures, some sequels perform well, while others tank.

The ink on this script is still wet.  Within hours much more will be known.  But, the warning signs about Visa Inc’s IPO are already well known and very public.

There were also warning signs for years prior to the vertex of the sub-prime mortgage roar.

Then, there were warning signs for just days prior to Bear Stearns’ collapse.

Now, there are just literally minutes left and a final call to caution against the Visa IPO.   In minutes, the Federal Reserve is poised to plummet interest rates in an attempt to improve the economy or to harvest another banking bailout.  Without the last minute interest rate decrease, we expected that the Visa IPO would be derailed. 

Using these types of dangerous circuit breakers sends the wrong message and might only buy a brief intermission for investors to get absorbed in the euphoria of the moment as they attempt to chase MasterCard’s stock appreciation, rather than perform the necessary due diligence to evaluate what is behind the thousands of banks’ race to distance themselves and bail on Visa Inc.

“Visa Plans Stock-Market Debut as Demand for New Shares Slumps” (via Bloomberg)

Click here to read the Elizabeth Hester report in Bloomberg.

“Visa’s $15 Billion IPO: Feast or Famine?” (via Fortune)

Click here to read the Katie Benner report in Fortune Magazine

Visa, Inc. Due Diligence: Have Investors Talked With Merchants?

After reading the Visa, Inc. IPO Risk Factors, we wonder whether investors will actually stop by and talk with the millions of merchants, companies and organizations which are forced to accept MasterCard and Visa – the two control a whopping 80% market share of all electronic payment processing solutions.  For us, the key word is “Interchange” and the below thousand plus news and commentary postings by WayTooHigh.com provides just the start.

Visa and MasterCard Adjusting Interchange Rates

“Visa, Inc. FORM S-4 SEC Registration Statement” (click here to view the SEC filing)

———————————————————- 

Want to know more about lead plaintiff ScanMyPhotos.com?  Click here and read their daily blog: Tales from the World of Photo Scanning

What is the Federal Reserve’s Role in the Visa IPO?

Is it just a coincidence that the Federal Reserve is expected to implement the steepest rate cut in nearly three decades just hours before the planned Visa IPO?  

Today’s market turmoil [Paulson admits U.S. economy in sharp decline] was just handed carefully crafted rose-colored glasses to wear.  But, it might crack tomorrow and lead to one more financial woe, as Visa Inc. investors get caught as the melodic music stops and there are fewer chairs left in the game.

“The Visa IPO” (Prospective from CreditSlips.com)

CreditSlips.com has a detailed overview and discussion of the Visa IPO at this link.

Excerpts:

1. “This market seems like terrible timing for an IPO, although for liquidity-strapped banks, the IPO could be a much-needed source of cash.”
2. “A major factor driving Visa’s IPO is antitrust liability. It is Visa’s litigation exposure… and, on a much larger scale, the potential antitrust liability connected to interchange and merchant restraint litigation and the possibility of legislative changes to interchange.”
3. “Recent developments on interchange and merchant restraints don’t bode well for Visa. The European Union, Australia, Brazil, Colombia, Germany, Honduras, Hungary, Israel, Mexico, New Zealand, Norway, Poland, Portugal, Romania, Singapore, South Africa, Spain, Sweden, Switzerland and the United Kingdom have all moved against or begun to regulate interchange fees and the merchant restraints that shield interchange from normal market pressures. US regulators have been behind the curve on this, but there’s now interchange legislation pending in several states (none of its particularly aggressive—at worst prohibiting interchange on sales tax) and a bipartisan bill was recently proposed in the House that would create as special administrative law judge panel to oversee interchange rate arbitration and set rates if necessary.”
4. “The Visa IPO creates a company with an unusual 3 stock-class capital structure that can only be explained as an antitrust shelter. Like MasterCard’s post-IPO structure, the Visa post-IPO capital structure is designed to permit banks to retain effective control over the company without holding a majority of shares and giving a veneer of independence to decisions about the setting of the interchange rate and network rules, in short plausible antitrust deniability. The structure also reduces banks’ antitrust exposure going forward, albeit at the cost of some of Visa’s revenues, but as a mutual-type member association, Visa was not designed to be a profit center in the first place.”

“Visa Set for Massive IPO Amid Financial Storm” (via Channel NewsAsia)

Click here to read article.

Excerpt from Channel NewsAsia:

• “Credit card giant Visa was set to launch trading Wednesday in the largest share offering in US history, even as stock markets are being tossed by worries about a mushrooming financial crisis.”
• “ Yet Visa’s IPO appears headed right for a financial market storm with investors battening down the hatches amid worries of a credit crunch that could hurt many firms, especially in the financial sector.”
• “The move comes at a time when IPOs are few and far between, especially in the financial sector.”
• “‘With concerns surrounding the slowdown in the economy, weakness in the financial sector, the skyrocketing price of oil, and the plummeting dollar, it’s not surprising to find that the initial public offering market has pretty much dried up,’” said Jocelynn Drake, analyst at Schaeffer’s Investment Research.   “Who would want to issue their shares in this market? Only a behemoth such as Visa.”

Why Should The Public Bail Out Visa and the Banks?

With millions of families forced to vacate their foreclosed homes due to unchecked greed by the banks and financial institutions – dispatched from their oversight responsibilities, in just two days the public is poised to again bail out the banks.  This just hours after the Federal Reserve handed out billions in public fund to bail out Wall Street.  Now, round two. 

The banks which own Visa, the largest credit card association, are again moments away from scoring another multibillion dollar windfall.  No, they are not getting the funds by raising interchange rates – that is scheduled for April 1st. 

Instead, the pubic is lining up to hand over billions to the thousands of banks looking for their next fix.  This time, the ill-advised investors are not studying the SEC documents and catastrophic risk factors that could lead to Visa’s insolvency.  These are not our words, but Visa’s – click here.

With the record number (nearly three times the previous high) of visitors to WayTooHigh.com – The Credit Card Interchange Report, today signals a shift in philosophy.  Today, more people are being cautioned that if our merchant interchange litigation is successful, it could lead to the demise of Visa.  Or, will the Federal Reserve then step in and refund investor’s losses?

“Eroding Confidence Stings Bank Shares” – IHT

“Visa Files $10 Billion IPO” (From Nov 10, 2007)

If you thought the crashing dollar caused energy prices to increase 70% in the past few months, that’s nothing.  The greed and mismanagement at the banks boast an even larger tale. In just four-months, the banks nearly doubled their valuation estimates for Visa Inc.  We just came across this November article describing the $10 billion Visa  IPO plan, which is now hovering closer to $20 billion. 

• Should You Join the Visa IPO Craze?” (via Charlotte Observer)
  
• Visa Inc. IPO Largest in US History; First it was 5, then 10 and Now $18.8 Billion – That’s Some Rich Valuation Appreciation
• Visa’s Inc’s $10,000,000,000 Misguided Hedge From Litigation (WayTooHigh.com)

WayTooHigh.com in The New York Times

WayTooHigh.com – The Credit Card Interchange Report in the news:

Click here to read the Financial Times update on the Visa IPO plans. ["Visa's Monster IPO: Has JPM Have Enough on its Plate?"]

Click here to read The New York Times update on the Visa IPO plans ["Will Bear Deal Delay Visa Offering?"]

—————————————————

Want to know more about lead plaintiff ScanMyPhotos.com?  Click here and read their daily blog: Tales from the World of Photo Scanning

More Questions About the Visa IPO (via MarketWatch)

Click here to read Visa’s reply to a MarketWatch reporter’s question about whether the IPO will move forward as planned. 

“Market Turmoil Will Not Stop Visa IPO” (via Reuters)

Click here to read the Reuters update

Riddle: What Do Visa and MasterCard’s Interchange Fees, Photographic Film and the Yellow Page Print Directories Have in Common?

Non eco-friendly relics from last century, like photographic film and bulky Yellow Page directories, in our opinion, share something in common with Visa and MasterCard’s interchange fee structure.

Even worse, the billions of bank-mailed credit card solicitation junk-mail sent each year fill up land fills along with billions of plastic charge cards cast-away.  Whether it is Interchange fees, photographic film or Yellow Page print directories, in our opinion, they are all obsolete in today’s high-tech society.

The difference is that consumers and businesses can quickly adopt.  Most have switched from film too digital, and many are switching from print to Internet advertising [Click here for an overview of phone book giant R.H. Donnelley’s quandary].  The manufacturers adjusted too.  Many directory listing companies are offering online solutions. 

And, in our case, retailers like us modified the entire photo business model.  Entrepreneurs are switching from print Yellow Page advertising to Google and other online directory listings. For ScanMyPhotos.com, we were forced to change, and fast. AT&T Real Yellow Pages “forgot” [they literally forget] to run one of our display ads last summer in Central Orange County, California.  These are the legally contracted ads we place every year and were an essential marketing tool for us.Subsequently, in preparing for our new Blog: YellowPage the Dinosaur, we contacted several others in our industry and they share our opinion of the Yellow Page’s demise.  [website: blog.yellowdinosaur.net].As the phone stopped ringing from local customers, we were fortunate that ScanMyPhotos.com also relies on national customers, our website and Blog: Tales from the World of Photo Scanning to spark traffic and new customers.  For complete information on our quagmire see our new Blog: YellowPage the Dinosaur. Our Yellow Page story was just profiled in B to B Magazine, but we are still out the more than one-hundred thousand dollars from lost revenues . Even one of the online directory companies picked up on our predicament and has the ScanMyPhotos.com new customer profile on their site.What does this have to do with our interchange fee battle?

As technology and efficiencies caused oceanic-sized changes to the Yellow Pages and film businesses, Interchange fees continued to rise.  Interchange fees were designed to be cost-based to cover the four-party payment network when we used those antiquated manual credit card imprinters and thick stack of carbon-copy receipts.  Unlike with film and the Yellow Pages, merchants cannot easily switch to other electronic payment networks. The 80% market power exerted by Visa and MasterCard is insurmountable.

Like most merchants, doctors offices and millions of all-sized companies, we are forced to accept Visa and MasterCard – pay their non cost-based rates [$40 billion annually] and even their whimsical fee adjustments.  Another fee adjustment was recently announced, but merchants won’t know the new rates until after the Visa IPO occurs and not until the day the new rates are imposed on April 1^st – April Fool’s Day. These unchallenged and unfair fees are, after all, how we got started with our antitrust litigation in the first place. [Click here to read 2005 The Wall Street Journal article by Wendy Bounds and Robin Sidel]. Back in 2005, both Visa and MasterCard collectively and “coincidentally” were united in sharing the announcement that their signature affinity cardholder interchange fees were rising. This action caused merchants to also be taken on a ride when cardholders paid with their plastic frequent-flier cards. And, they are at it again, with a planned April 1 new rate adjustment.Whether it is film or yellow page directories, we modified our business model. But, when it comes to gallant, anti-competitive, cartel price-fixing, retailers are unable to modify our practices. Photographic film’s demise caused havoc on many business. The Yellow Page ad that AT&T forgot to run for us equally had a detrimental impact.However, with Interchange fees we, like millions of other merchants are all beholden to Visa and MasterCard. The day we stop accepting Visa and MasterCard is the day we are forced to close down, yet we are forced to pay whatever rates they impose.————————————————————————————-

Want to know more about lead plaintiff ScanMyPhotos.com?  Click here and read their daily blog: Tales from the World of Photo Scanning

It’s a Record!

If it isn’t delayed or cancelled, the Visa Inc. IPO won’t be the only record to be broken.

Today marks the highest – record-setting number of domestic and international visitors to WayTooHigh.com – The Credit Card Interchange Report since we launched this news and commentary site in 2005 to chronical our battle against Visa, MasterCard and its member banks’ anti-competitive merchant interchange fee price-fixing litigation.

—————————————————

Want to know more about lead plaintiff ScanMyPhotos.com?  Click here and read their daily blog: Tales from the World of Photo Scanning

Visa Inc. IPO Update

Although it is just our opinion that the Visa IPO will be derailed, we still assert that potential investors are still hypotized with the same exuberance that Bear Stearns’ chairman, James Cayne possessed when playing in the recent North American Bridge Chapionship in Detroit. 

According to The Wall Street Journal, Mr. Cayne was away from a cell phone and email during last summer, during the firm’s impending fiscal crisis.  Even our company, ScanMyPhotos.com is always accessable with iPhone, 24/7 Live Support and other tools to provide instant access.

In the case of Mr. Cayne, as quoted in the Journal ["Cayne on Golf Links, 10-Day Bridge Trip Amid Summer Turmoil"] by Kate Kelly [Nov 1], “[a]ttendees say Mr. Cayne has sometimes smoked marijuana at the end of the day during bridge tournaments.”  In the case of what might turn into an oversubscribed Visa IPO, unless Visa pulls the plug, we can’t help but ask what the new shareholders are also smoking? 

The IPO, along with its risk factors represents a new vanguard of greed in the eye of the financial markets’ tornado-like storm.

——————————————————

Want to know more about lead plaintiff ScanMyPhotos.com?  Click here and read their daily blog: Tales from the World of Photo Scanning

Visa IPO Derailed, Suggests Mitch Goldstone

[March 18, 2008, update:  Visa prices IPO at $44 a share, above expected range, raising a record $18 billion]

With thirty-minutes until the U.S. financial markets open, Mitch Goldstone, co-editor of WayTooHigh.com – The Credit Card Interchange Report is making the call that this week’s planned multi-billion dollar exit parachute for  thousands of banks which own the giant credit card association will fizzle.  The Visa IPO was planned as the nation’s most ambitious public offering, yet Visa Inc. is also facing the largest antitrust litigation too, one which in their own words could cause the credit card processing firm to become insolvent if we are successful.

This should now come as no surprise, especially after former Fed Chairman, Alan Greenspan described the financial mess as being the worst since WWII: “Greenspan Worns of Worst Crisis Since 1945.”

Obviously, the banks think differently, especially JP Morgan Chase, which is much more than a lead underwriter.  Did you know that they are also a primary investor in Visa Inc and own one of the largest Visa and MasterCard electronic payment processors, Chase Paymentech?

“I had more than a feeling that the IPO was dead on arrival several weeks ago and have been calling attention to the reasons ever since,” said Goldstone, who is lead plaintiff in the merchant interchange class-action against Visa, MasterCard and major banks.  On March 1st, WayTooHigh.com, which has been chronicling the interchange battle with daily news and commentary updates since early 2005, had this posting:  Why the Visa Inc. IPO Might be Delayed for Shelved?   Several other similar commentaries were subsequently published by WayTooHigh.com. 

“Although there have been no other public reports which we read suggesting Visa Inc. might delay or cancel its IPO, we are not surprised.  After all, the banks were equally in the dark when it came to not protecting themselves and shareholders by acting to thwart the sub-prime mortgage meltdown and other costly missteps,” said Goldstone.

Want to know more about lead plaintiff ScanMyPhotos.com?  Click here and read their daily blog: Tales from the World of Photo Scanning

“Visa Expected to Buck Trend” (via WSJ)

WSJ reporter, Lynn Cowan writes on March 17th that the still expected Visa IPO “is expected to be a hit with investors.”  Is her article just wishful thinking?  After all, it is St. Patrick’s Day!

“Wall Street in Crisis of Confidence” (Via CNN)

Click here to view market update via CNN.

World Stock Markets Plunge More than 5% on Monday; Oil at $111.00; Gold up 2%

We cannot help but think back to the recent presidential news conference where the U.S. president seemed stunned and in disbelief that there was $4.00 a gallon gas being sold in the States.  We wonder whether Mr. Bush is also aware of this dire global market crisis, where the Federal Reserve is ponying up unprecedented billions to a multitude of bankers?   The same bankers who are hoping to reap billions from this week’s Visa Inc. IPO, and the same bankers who looked the other way during the sub prime mortgage fiasco, and the same bankers who stand accused of illegal price-fixing by agreement by artificially setting the MasterCard and Visa merchant interchange fees.

If We Were in Vegas, Our Wager Would Be on Visa’s IPO Not Happening

[March 18, 2008 update:  Visa prices IPO at $44 a share, above expected range, raising a record $18 billion]

Based on the dire financial news reports, stock market turmoil – from Bear Stearns to soaring gold and other commodity prices and non-stop Federal Reserve interventions, we are thinking that the Visa IPO will not happen this week, or any time in the near future.

Let’s see who will be right – us or the thousands of gleefully greedy banks hoping to bailout and transfer partial ownership on an already battered investment community.

From this weekend’s broad-base of WayTooHigh.com readers and the page-viewed areas of interest – specifically about our Visa IPO commentaries – we still think the public offering will be canned or minimally, delayed.

We guess Visa’s public reason will be due to “market conditions,” but we can’t imagine investors ponying up to own a piece of a company that, according to their SEC filing could become insolvent if our merchant antitrust litigation is successful.

Recent Postings of Interest

Visa Inc. Files 10-K Annual Report, Amends S-1 Registration
key point: “Failure to successfully defend or settle the interchange litigation would result in liability that to the extent not covered by our retrospective responsibility plan could have a material adverse effect on our results of operations, financial condition and cash flows, or, in certain circumstances, even cause us to become insolvent.” 

“Visa: Bailing Out The Banks” (NY Times)

“Should You Join the Visa IPO Craze?” (via Charlotte Observer)

Visa Inc. IPO Largest in US History; First it was 5, then 10 and Now $18.8 Billion – That’s Some Rich Valuation Appreciation

Visa’s Inc’s® $10,000,000,000 Misguided Hedge From Litigation (WayTooHigh.com)

Understanding the Word “Insolvency” Is Crystal Clear (WayTooHigh.com)

Thousands of Banks Pin Hopes on Visa Inc. to Bail Them Out

“Significant Victory” Announced Against MasterCard by Class Plantiffs

DISCLAIMER – Just to be crystal clear, we are repeating our website disclaimer:  This informational web site was created to provide news and commentary updates only. None of the information posted on WayTooHigh.com is intended to constitute legal arguments; it reflects only the opinions of its co-editors and not of any other plaintiffs or other parties involved in the merchant antitrust litigation. The information is not guaranteed to be correct, complete, or current.  We make no warranty, express or implied, about the accuracy or reliability of the information posted by WayTooHigh.com or at any other Web site to which this site is linked.

————————————————————–

Want to know more about lead plaintiff ScanMyPhotos.com?  Click here and read their daily blog: Tales from the World of Photo Scanning

“Wall Street Waits for the Next Domino to Fall” (Financial Times)

Will it be the Visa IPO?

Click here for more info.

“Credit Cards Are Frothy, Not Bubbly” (via NY Times)

Click here to view entire article.  Excerpt from the “Talking Business” New York Times, March 15 article by Joe Nocera.”

“A month ago, BusinessWeek ran a cover article essentially predicting that credit cards would be the next shoe to drop in our increasingly precarious economy. “The party was paid for with credit cards,” read the magazine’s bold cover line. “The hangover will be a whopper.”…”

“…So what has happened with credit card debt? Since the early 1980s, debt has gone from 80 percent to 133 percent of disposable income, according to Kathleen Keest of the Center for Responsible Lending. But the rate of increase in credit card debt actually slowed at the beginning of the century. Why? Because the housing bubble had begun, and with it came a shift from credit card debt to home equity loans. From 2000 to 2006, Americans borrowed a staggering $1.3 trillion from their homes. By comparison, credit card debt rose much more slowly.”

Visa and MasterCard Adjusting Interchange Rates – Part II

On the eve of Visa Inc’s bank bailout, we have this news: interchange rates are changing, but we have no clue what it will be until after the IPO is completed.

What other business can announce they will adjust their fees, but will not let you know its new rate schedule and how it will impact your wallet until the day it takes effect?  No, not the petroleum industry.  But, it does take a mirror-like cartel with unbridled market power to decree these types of changes. 

Over the past years, MasterCard and Visa have both attempted to retool and convert from their bank-owned control by hiring an independent board of directors and restructuring to help respond to our antitrust assertions. 

This, along with other measures were designed to soften the reality that both credit card associations run a monopolistic enterprise, where its card network fixes prices at supracompetitive levels.  Even the letter we received from Chase Paymentech married MasterCard and Visa together to virtually make them indistinguishable from each other – they are so similar that the processing company didn’t need to send two separate letters, but, instead batched both announcements together as one.

It seems that all the good changes that Visa and MasterCard enacted to move forward were just window-dressing.  The reality is all here in this letter.

On April 1st, the two credit card associations will press a button and unilaterally change several merchant interchange rates.  As merchants, we will be kept in the dark until … April Fool’s Day! 

We will not even know the new rates until we view our statement a month later, or visit the Visa and MasterCard websites, which require an advanced degree in gobbledygook to decipher. 

Visa and MasterCard Interchange Rates Revised on April 1

Want to know more about lead plaintiff ScanMyPhotos.com?  Click hereand read their daily blog: Tales from the World of Photo Scanning

WayTooHigh.com: An International Prospective

With our daily mix of international readers, click here to see how WayTooHigh.com was just translated for viewing in Taoyan, Tai-wan.

Welcome to our international readers.  Here is a listing of recent international cities and counties with WayTooHigh.com visitors:

• Singapore
• Taoyan, T’ai-wan
• Edmonton, Alberta
• Tokyo
• Burnaby, British Columbia
• Burlington, Ontario
• Zagreb, Grad Zagreb
• Gloucester, Gloucestershire, UK
• Singapore
• Kuwait
• Fukuoka, Japan
• Bangalore, Karnataka
• London, London, City of
• Munich, Bayern
• Sydney, New South Wales
• Buenos Aires, Argentina
• Praha, Hlavni Mesto Praha, Czech Republic
• Limerick, Ireland
• Johor Bahru, Johor, Malaysia
• Auckland, New Zealand
• Greece
• Curacao, Zulia, Venezuela
• Paris, Ile-de-France, France
• Dubai, Dubayy, United Arab Emirates
• Mechelen, Antwerpen,
• Goinia, Goias, Brazil
• Alicante, Comunidad Valenciana, Spain
• Haifa, Hefa, Israel
• Riyadh, Ar Riyad, Saudi Arabia
• Weilburg, Hessen, Germany

Visa and MasterCard Interchange Rates Revised on April 1

We just received a letter from Chase Paymentech dated March 4th (today is March 14), that on April 1st, both MasterCard and Visa will be adjusting their merchant interchange fees and certain rates may increase.  All we know now is certain merchant interchange rates will be “modified.”

This is the link that Chase Paymentech provided for Visa, but the new rates will not be posted until April 1, the day the new rates take effect.  

As for MasterCard, try figuring out what this means from the link provided by Chase Paymentech.

“Visa Inc. IPO Proceeds Coming at Crucial Time” (MarketWatch)

According to Steve Gelsi at MarketWatch, the “Banks [are] getting about $10 billion of $16 billion [Visa Inc.] offering.”  Click here to read article.

Will Visa IPO Hit the Wall, be Delayed or Cancelled?

Today’s newsline:

• Bear Stearns shares fall 47%.
• 28-days of secured funding from Fed and JPMorgan Chase for Bear Stearns [What's up with this magic 28-days? First, the Fed extended credit to prop up the mortgage loans and now this.  Wonder if it's all just to make sure the Visa IPO's bank bailout doesn't hit the skids?]
• Alan Schwartz, Bear Stearns’ CEO says, according to Reuters: “our liquidity position in the last 24 hours had significantly deteriorated.”
• Consumer sentiment slips in March to 16-year low.
• Fears big U.S. bank is in trouble.
• And, the #1 reason to worry: “President Bush Plans Bullish Speech On Economy.”

How the Fed’s $200-Billion Intervention Indirectly Boosts Visa’s IPO Valuation

Want to know more about lead plaintiff ScanMyPhotos.com?  Click hereand read their daily blog: Tales from the World of Photo Scanning

“Carlyle Capital in Default, on Brink of Collapse (via Reuters)

More trouble for the banks.  By way of pure coincidence, Carlyle Group, the buy out firm is in default on ($16.6 billion) – nearly as much money as Visa hopes to raise next week. 

Perhaps they can double-down.  

Can the banks hold on until the Visa Inc. IPO bailout? 

Click here to read the Reuters article.

A Big Fight Even for Activist Mitch Goldstone (Marshall Magazine)

[reposted from Oct. 2005]

Mitch Goldstone Leads A Rebellion, This Time Against Credit Card Fees

By Robert Barnett – University of Southern California “Marshall Magazine“It pays to read your mail, as Mitchell Goldstone knows and Visa and MasterCard are finding out.

Goldstone, a 1985 graduate of USC Marshall School of Business, and his partner, Carl Berman, are the co-founders of 30 Minute Photos Etc. and its online sibling, 30minphotos.com which, as the names suggest, develop photographs from film and digitized files, respectively.

Goldstone has made lots of news over the years, but nothing like this summer when his company became the lead plaintiff in a class action antitrust suit against Visa, MasterCard and major banks. The story made the pages of the Wall Street Journal, Time magazine and the New York Times.
Filed in federal court in Connecticut in June 2005 with four other small and midsize businesses, the suit accuses the credit card companies and the banks that issue their cards of illegally fixing the interchange fees that merchants pay for credit card transactions. The credit card companies have defended their interchange fees, with MasterCard’s general counsel calling them “beneficial, efficient and pro-competitive” in a statement the giant credit card company made during a recent Federal Reserve hearing. Controversy is nothing to new to Goldstone. He’s drawn to social and economic causes the way some people have hobbies, and thinks nothing of spending hours and time and money–and overlaying all that with entrepreneurial inventiveness–on an array of projects. In addition to the class action suit, he organized Operation Photo this year to collect digital cameras for families of soldiers deployed overseas. He promoted tsunami relief for the Red Cross on the company website. He ran for city council in Irvine, CA.But the lawsuit against the giant credit card companies represents the biggest, most formidable opponent that Goldstone has ever faced. If he and the other plaintiffs win, it could cost the credit card companies billions of dollars.As with many of Goldstone’s past crusades, this one started almost by accident. In February, Goldstone and Berman received a notice in the mail that their interchange fees were being raised. “I usually throw them away,” Goldstone explained, ”but Carl brought it to my attention. When we started the business in 1990, there were a handful of interchange fees. Now there are nearly 100 different rates. And they’ve all been going up steadily. For example, the fee for debit cards has gone up 300% since 1999.”Goldstone wrote to the senior management at Visa and MasterCard, asking them to rescind the increase. “Always start at the top,” Goldstone stresses. “It’s one of the greatest lessons I learned at Marshall.”

No answer. He followed up with a phone call to the two companies. Still no response. And that got the ball rolling.

Today, Goldstone and Berman write and edit the blog, “WayTooHigh.com,” posting articles and editorials on the interchange fees and arguing that the fees are a hidden tax on consumers since they become part of the cost of all goods and services purchased. Their retail rebellion appears to be spreading. Kroger and six other national retailers filed their own suit against Visa U.S.A., and charged it with anticompetitive practices.

Creating a national groundswell for a cause he believes in is nothing new to Goldstone. In fact, he enjoys it. “It makes it fun,” Goldstone insists, “knowing we’re doing something that is going to help somebody.” In a sense, he sees it as part of his job. “That’s what being an entrepreneur is all about,” as Goldstone sees it. “It’s not just about making money. It’s about doing something that’s good because that’s the ultimate scorecard.”

Organizing Operation Photo is a perfect example of how social and economic issues just seem to find Goldstone – and how he uses his entrepreneurial skills to identify and promote a solution.

“I got a phone call at 7:00 in the morning right after Christmas of last year from Jennifer Petersen, a former 30 Minute Photos Etc. employee who had left to become a full-time mom,” recalls Goldstone. “She’d had a dream the night before. What if her husband was serving in the military and he wasn’t able to see their daughter? Was there any way we could get people to donate cameras to give to military families? By 8:00, the business plan was already cemented and finalized.”

Within days, they had Operation Homefront onboard to coordinate distribution, secured pledges from Kodak and other digital camera manufacturers for hundreds of new cameras, set up a “Operation Photo” website with a link from the 30 Minute Photos Etc. homepage, the press had jumped on the story, and the first cameras were already flooding in.

By the time Operation Photo wrapped up on July 4, it had collected over $150,000 worth of cameras and distributed them to grateful and appreciative families in and around military bases all over the country. In fact, many of the photos of new babies and birthday parties now being shared overseas are being developed at 30 Minute Photos Etc., thanks to its military family discount.
Goldstone always wanted to be an entrepreneur. A New Yorker by birth, he applied to USC specifically so he could enroll in what is now USC Marshall’s Lloyd Greif Center for Entrepreneurial Studies.

Goldstone and Berman started 30 Minute Photos Etc. in 1990 on the premise that family photos were among our most treasured possessions. They separated themselves from the one-hour and overnight photo competition by beating them in turn-around time, delivering a higher quality photo, staying ahead with new technology, and building a client base that included Hollywood celebrities and California Governor Arnold Schwarzenegger.

In the late 1990s, 30 Minute Photos Etc. was blindsided by the digital revolution in photography. Suddenly customers weren’t bringing in rolls of film. They were printing them off their home computers. Business took a nosedive. Goldstone transformed the company into an online boutique photo service, creating a website for customers to format and edit their digital images, and with the click of their mouse, have high quality prints processed and shipped immediately to wherever they lived in the United States. He even put a 24-hour live support capability right on the website.

Still it was a struggle to rebuild the business. In 1997, Goldstone bought some local cable spots for the MTV Video Music Awards, only to discover that the show would be featuring rap singer Eminem performing live. Offended by the rapper’s lyrics, Goldstone bought up all the local commercial time for the awards program so that organizations including the Family Violence Prevention Fund, the Museum of Tolerance, and the Human Rights Campaign Fund could ran public service announcements educating viewers on violence against women, bigotry, and gay rights.

“That was extremely expensive,” Goldstone recalls. “This was our whole campaign to get younger adults excited about our business and to use it. Instead we ran those spots because we believed it was the right thing to do. As it turned out, we also got a lot of media coverage for the educational campaign and ourselves,” he continues.

So what’s next for Mitch Goldstone? Wait and see. Visa and MasterCard may regret not answering their mail.

[Robert Barnett, a freelance writer in Los Angeles, is a contributing editor ofthe University of Southern California's Marshall Magazine].

 Want to know more about lead plaintiff ScanMyPhotos.com?  Click hereand read their daily blog: Tales from the World of Photo Scanning

How Do Visa, MasterCard and Banks Benefit from $111.00 Oil?

It’s a new record, U.S. crude oil just hit $111.00 a barrel. 

What does this mean for the members banks and the two giant credit card associations?  Why aren’t people noticing that the credit card associations along with its member banks are reaping giant windfall profits from our economic energy crisis?

How can they justify reaping windfall profits during the global economic energy crisis? 

Did you know that each time you use plastic to fill up at the pumps, you are forced to pay upwards of nearly $2.00 just in electronic payment interchange fees?

Gas pump prices from photos taken by WayTooHigh.comon March 9, 2008 in Malubu, CA

Want to know more about lead plaintiff ScanMyPhotos.com?  Click hereand read their daily blog: Tales from the World of Photo Scanning

“House Bill Could Cast a Cloud Over Visa I.P.O.” (NY Times)

Click here to read March 13th article, edited by Andrew Ross Sorkin from the New York Times.

How the Fed’s $200-Billion Intervention Indirectly Boosts Visa’s IPO Valuation

28-days to a Market Nightmare

(click herefor update from Ye Xie and Gavin Finch at Bloomberg on “Concern Fed Package Wont Suceeed“)

Tuesday’s $200-billion infusion in Treasury securities did more than subsidize the market’s 400-point Dow rise (3.6%), it indirectly is fortifying investor confidence in advance of next week’s planned Visa IPO. It is also a maneuver to briefly sustain market perceptions that the banks are again fiscally healthy.

A weakened stock market would have spelled trouble for getting the Visa, Inc. IPO off the ground. Without this help from the Federal Reserve to the banks, the stock market’s glumness would overshadow what is planned as the nation’s largest initial public offering ever.  Instead, the Fed designed this liquidity quick-fix that will last just 28-days- coincidentally, just long enough to see the Visa IPO get funded.

What happens on April 9^th, when the $200-billion bailout is called back?

The billions in increasingly valueless home loan packages will again be an issue in 28-days, but just after the investors’ sentiment is uplifted by this artificial market manipulation.  As the banks rush to unload giant portions of their ownership in Visa Inc. investors should look closely at the real fable behind this Fed action.

• What happens to the equity market and the post-Visa IPO valuations then?
• What happens next month to the valuation and liquidity of the mortgage-backed securities that are being held as collateral?
• The banks’ balance sheets will be mellowed and ripened with billions of dollars gained from transferring part ownership of Visa Inc. into public hands.
• The same Visa, Inc. IPO risk factors remain, even after the Fed’s funding prop.
• In 28-days, after the Fed’s temporary fix by buying mortgage securities that others don’t want expires, what do the new Visa Inc. Shareholders do after the banks have their money?

_________________________________________ 

Want to know more about lead plaintiff ScanMyPhotos.com?  Click hereand read their daily blog: Tales from the World of Photo Scanning

“National Restaurant Association Applauds Credit Card Fair Fee Act”

[via press release]

The National Restaurant Association today applauded the Credit Card Fair Fee Act, legislation introduced last week by U.S. House Judiciary Committee Chairman John Conyers (D-MI) and Rep. Chris Cannon (R-UT). The bipartisan legislation will allow large and small businesses to negotiate directly with credit card companies in an effort to reduce the artificially high credit card interchange fees.

“Many of our members have expressed concern about the unexplained increases in fees and inability to negotiate a fairer rate with credit card companies. The Credit Card Fair Fee Act is a solution to an issue that poses a burden to small businesses, including restaurants, across the country,” said John Gay, senior vice president of government affairs and public policy for the National Restaurant Association.

Interchange fees are meant to cover the cost of processing a credit card transaction and the risk taken by the issuing bank that it will be repaid. However, reports show that the cost of processing is steadily decreasing in the United States, while fees continue to rise. The result appears to be an increase in revenue for the card issuer and a drain on a business’s bottom lines. Interchange fees amount to approximately $2 of every $100 spent using credit cards.

Over the last three years, unfair credit card practices, policies and fees have been scrutinized by the public, consumer groups, the Federal Reserve and Congress. Interchange fees have been the subject of hearings three times in recent years under both Republican and Democratic Congresses.

Last July, the House Judiciary Antitrust Task Force Subcommittee conducted a hearing on the lack of competition in the credit card marketplace. The Credit Card Fair Fee Act is a direct outgrowth of the Antitrust Task Force’s bi-partisan examination into the fees, policies, and practices of the credit card industry.

The National Restaurant Association is a member of the Merchants Payments Coalition (MPC), a group of retailers, supermarkets, drug stores, convenience stores, fuel stations, on-line merchants and other businesses who are fighting against unfair credit card fees and fighting for a more competitive and transparent card system that works better for consumers and merchants alike. The coalition’s member associations collectively represent about 2.7 million stores with approximately 50 million employees. For further information, please visit www.unfaircreditcardfees.com.

“Extra Credit for Visa’s IPO” (BusinessWeek)

Click here to read the March 10, Ben Steverman BusinessWeek article on the Visa IPO.

“Will Visa IPO Deter Antitrust Lawsuits?” (Financial Week)

Click here to read the March 10th FW article by Carleen Hawn.

Abstract, key Ppints from the Financial Week article:

• Investment banks may collect about $480 million in underwriting fees from the Visa IPO
  
• J.P. Morgan Chase, Bank of America and Citigroup, are among Visa’s largest shareholders, and stand to gain hundreds of millions of dollars—$1.1 billion in J.P. Morgan’s case—from unloading large portions of their stakes.
   
• Visa may have a different motivation for going public now, suggests antitrust litigator K. Craig Wildfang of the Minneapolis law firm Robins Kaplan Miller & Ciresi. “The purpose of Visa’s IPO is solely to try to get more lenient treatment from the courts under the antitrust laws,” he said. The timing of the offering, Mr. Wildfang believes, is part of Visa’s attempt to limit “its legal exposure to the Sherman Act.”
  
• Civil suits based on the same argument followed from American Express and Discover. Visa settled with American Express for $2 billion, and Discover’s case is scheduled to go to trial in September, though a person familiar with the matter told Financial Week it is likely to “be settled before it ever reaches a courtroom—probably for an amount in the B’s.”
  
• Visa plans to set aside $3 billion of its IPO proceeds to pay for “settlements of, or judgments in, covered litigation.” But $3 billion may not be enough, considering the other suits coming down the pike.
  
• The most pressing may be the case being argued by Mr. Wildfang on behalf of a group of retail merchants who accept Visa credit cards as a form of payment.
  
• Visa does not issue credit cards or lend money. That’s the job of its member banks, such as B of A, Wells Fargo and Wachovia. Instead, Visa processes the credit card transactions on its electronic payment network, in return for which it charges a host of fees that generated more than $5 billion in revenue for the fiscal year ended Sept. 30.
  
• The claim in the “merchant litigation,” filed in 2005 in the U.S. District Court for the Eastern District of New York, is that Visa and MasterCard regularly meet to agree on the interchange fees each will charge its merchants. “That is price-fixing, and it is a violation of the Sherman Act,” Mr. Wildfang alleged. “In any other industry, that would be illegal.”
  
• Going public may help Visa defend itself against the charge by convincing courts that it is a single entity. Under the Sherman Act, the “concerted activities” of groups, or “trusts,” are subject to greater scrutiny than the activities of “single actors.”
  
• But there is a last wrinkle in this theory: Despite MasterCard’s IPO, the European Commission recently said in a ruling that it still regards MasterCard to be a group, not a single entity. If U.S. courts use the EU as any guide, Visa may not have much more luck in court after its own IPO.
   

“Banks Face ‘Systemic Margin Call,’ $325 Billion Hit: JPM” (Reuters)

Click here to read the Reuters article by Eric Beech.

Visa Inc. IPO Valuation – $74 a share?

As Visa Inc. continues to prepare for its reported IPO possibly during the week of March 17 (according to Dow Jones), Morningstar suggests that the company’s real worth could be nearly double the amount they are planning to sell shares at.  Previously, according to Dow Jones, Morningstar’s estimate of Visa’s worth was $65 – and now, just one week later, it is $74.

What could cause these extra billions in perceived value?  One report explained that the reason is Visa’s brand name; Worldcom and Enron had strong brand names too.

What accounted for a $9 per share increase, especially at a time of market uncertainty, new legislation coming from Washington and a reminder that if the antitrust litigation is successful, it could cause the company to become insolvent?   Just yesterday, Legal Times pegged the potential legal liability at $50 billion. 

That’s Wall Street for you.  It seems to greatly be about perception.  What changed in just one week? 

Like several recent articles on Visa’s IPO, it omitted any mention of its potential liability from the merchant suits and a discussion of the recommendation about MasterCard’s IPO too.

We liked this assessment the best from Renaissance Capital: “Visa appears to be coming to market at a sizable discount to MasterCard based on (its) forward price-to-earnings ratio, which may be because the banks that are receiving most of the proceeds are strapped for cash and are pricing the deal to sell.”

Are the thousands of banks that own Visa simply being generous and sharing their wealth with investors?  When was the last time greed didn’t play a role in the valuation of an IPO?  Are the banks just being nice?  Why the run for the fire-sale exit?   Shouldn’t the banks secure the maximum payout possible for its shareholders?  Or, are the banks frightened and trying to push off their legal liability at any cost to rush this deal through? 

Recent WayTooHigh.com related postings:

• Visa Inc. Files 10-K Annual Report, Amends S-1 Registration
  key point: “Failure to successfully defend or settle the interchange litigation would result in liability that to the extent not covered by our retrospective responsibility plan could have a material adverse effect on our results of operations, financial condition and cash flows, or, in certain circumstances, even cause us to become insolvent.” 
  
• “Visa: Bailing Out The Banks” (NY Times)
• “Should You Join the Visa IPO Craze?” (via Charlotte Observer)
• Visa Inc. IPO Largest in US History; First it was 5, then 10 and Now $18.8 Billion – That’s Some Rich Valuation Appreciation
• Visa’s Inc’s® $10,000,000,000 Misguided Hedge From Litigation (WayTooHigh.com)
• Understanding the Word “Insolvency” Is Crystal Clear (WayTooHigh.com)
• Thousands of Banks Pin Hopes on Visa Inc. to Bail Them Out
• “Significant Victory” Announced Against MasterCard by Class Plantiffs

____________________________________________________

Want to know more about lead plaintiff ScanMyPhotos.com?  Click here and read their daily blog: Tales from the World of Photo Scanning

“MasterCard Statement on the Credit Card Fair Fee Act of 2008″ (via MasterCard press release)

[Click here to view MasterCard Worldwide press release.  Reprinted in its entirety].

Purchase, NY, March 06, 2008 – The electronic payments system benefits merchants and consumers because it is a highly efficient and secure way to increase sales and consumer satisfaction. The system was developed in the highly competitive marketplace of merchants, banks, payment networks and consumers. This legislation is an attempt by merchants and the Merchants Payments Coalition to put in place price controls, which will harm competition and the card products and services offered to consumers.

MasterCard believes there is no need for government intervention, and that it would be inappropriate for the U.S. government to set prices and negotiate the terms of contracts for private commercial entities. Such policy decisions in the past have proven to be unworkable, unpopular and detrimental to the free market economy. There is no evidence that demonstrates that such price controls will result in savings passed along to consumers. To the contrary, we believe such moves negatively impact consumer choice.

We will continue to work with our customers and other industry organizations, like the Electronic Payments Coalition, American Bankers Association, National Association of Federal Credit Unions, Independent Community Bankers of America, and the American Financial Services Association, to help members of Congress enhance their understanding of how interchange brings benefits to millions of consumers and merchants around the world.

For more information on Interchange, go to: http://www.mastercard.com/us/company/en/ourcompany/interchange.html

“At Stake is More Than $50 Billion if the Merchants are Successful” (Legal Times)

Click here to read the March 7th Legal Times article.

“Congress Takes On Credit Card Interchange Fees” (ConsumerAffairs.com)

Click here for the Martin Bosworth March 7th article in ConsumerAffairs.com.

The Credit Card Fair Fee Act: What Does It Mean to Consumers and Retailers?

Accredited media are invited to contact Mitch Goldstone, President & CEO of ScanMyPhotos.com, the lead plaintiff in the Payment Card Interchange Fee and Merchant Discount Antitrust Litigation against Visa, MasterCard and leading member banks of the two giant credit card associations. 

For a detailed history and prospective on the interchange battle, issues pertaining to the Visa IPO and commentary on the new legislation introduced by the US House Judiciary Committee – to enable merchants to negotiate interchange fees – Mr. Goldstone is available to share his prospective. 

Mr. Goldstone is an entrepreneurial expert who co-owns a nationwide Ecommerce and retail business based in California since 1990.  He co-edits WayTooHigh.com - The Credit Card Interchange Report and leading, well-known personality in this multi-billion dollar merchant interchange battle. 

To schedule an interview, accredited media may email: Goldstone (at) 30minphotos.com.

____________________________________________________

Want to know more about lead plaintiff ScanMyPhotos.com?  Click here and read their daily blog: Tales from the World of Photo Scanning

“Banks CEOs Face Grilling over Compensation” (CNBC)

[Via AP, CNBC] “Slated to appear Friday before the House Oversight and Government Reform Committee were Angelo Mozilo of Countrywide Financial, the nation’s largest mortgage lender; Stanley O’Neal, formerly of Merrill Lynch & Co. ; and Charles Prince, formerly of Citigroup.”

 Click here to read article  

“As IPO Looms, Visa’s Outside Counsel [Arnold & Porter] See Litigation Bonanza” [Law.com]

Arnold & Porter.  

With millions of merchants, the fresh eyes of Washington, the European Union, nation’s around the world, and entrepreneurs like us, the question is: how can Visa, MasterCard and its member banks explain the annual $40,000,000,000 hidden tax that (we assert) is based on illegal price-fixing by agreement and unbridled collusion? 

Even more questions about Visa’s IPO-planned multi-billion dollar bank bailout are raised from the March 7th Legal Times article by reporter Attilla Berry.  Click here to view.

Even the gigantic-sized billable hours for law firms like Arnold & Porter pale in the shadow of the potential liability, which was reported to be “more than $50 billion if the merchants are successful,” according to the article.

____________________________________________________

Want to know more about lead plaintiff ScanMyPhotos.com?  Click here and read their daily blog: Tales from the World of Photo Scanning

Visa Inc. IPO Delayed or Cancelled?

Based on market conditions, partisan legislation aimed to reduce hidden credit card interchange fees, the recent recommendation challenging MasterCard’s reorganization and IPO, and our antitrust litigation [which according to Visa's SEC filing could, if successful, lead to its insolvency], we wonder how the banks are going to attempt to spin this offering? Will the Visa IPO, which would be the largest in U.S. history, become known as the largest dud, non-event?  Will the March 7th Legal Times article have traction?

Click here for recent Reuters update

_____________________________________________

Want to know more about lead plaintiff ScanMyPhotos.com?  Click here and read their daily blog: Tales from the World of Photo Scanning

“Saving Billions for Consumers – Opening up and Reducing Interchange Fees” (via Chris Cannon Website)

[Via press release]

WASHINGTON DC – Congressman Chris Cannon (R-UT), along with Judiciary Chairman John Conyers (D-MI), today introduced the “Credit Card Fair Fee Act” (HR 5546) to address the anti-competitive aspects of credit card interchange fees and save American consumers and American families billions every year. 

Upon introducing this legislation, Congressman Cannon said, “Free market capitalism is the most successful economic system the world has ever witnessed.  Bedrock principles of that system include transparency and competition.  The current system of setting fees that merchants pay for credit card transactions is anti-competitive and secretive.  This bill does not set prices.  Instead, it would require that fees be set in a transparent manner so other companies can compete for business and consumers would not pay artificially high rates.” 

Cannon continued, “In the end, credit card companies should set whatever fees the market will tolerate.  This bill is a win for consumers, for retailers, and for the credit card industry which will benefit from competition.” In closing, Congressman Cannon said, “This is a complicated issue.  This bill may not be the final answer, but society’s interest in this is so great that we hope all interested parties will come to the table.” 

For more information, please visit: http://chriscannon.house.gov/ChrisCares/CreditCards.htm  

For a graphical depiction of how this bill would mandate negotiations, please visit: http://chriscannon.house.gov/UploadedFiles/ccflow.pdf

Each year, consumers pay billions of dollars in hidden fees that never appear on their monthly statements.   Those fees are called “Interchange fees.” Credit card companies and their banks charge them to store owners, businesses, or anyone else anytime a credit card is used to make a purchase.  As much as $2 of every $100 you spend goes to interchange companies or the banks behind the card.   Last year, more than $36 billion in interchange fees were collected, up 17 percent from 2005 and 117 percent since 2001.

 The average American family is now paying more than $300 a year in credit card interchange fees. Retailers are then pass along the credit card interchange fee to consumers in the form of higher prices. The credit card interchange fee increases the price of everything consumers buy, even those who don’t use plastic and choose instead to pay for their purchases in cash or by check because retailers are not allowed to offer lower prices for cash or debit transactions because of their agreements with Visa and Mastercard. 

For example, with the price of gas at more than $3 a gallon, credit card companies and their banks are collecting as much as 8 cents a gallon in interchange fees.  Americans are paying the highest interchange fees in the world, an average of two percent, compared with less than one percent in most other industrialized countries.  Credit Card fees have a complex pricing structure, which depends on the card association, the type and size of the merchant, the type of credit card and the type of transaction.  

Convenience stores, supermarkets, warehouse clubs and other merchants that sell low-margin items may have lower rates.  Hotels and car rental businesses have higher rates. Among transactions, those with a credit card have higher rates than those with a signature debit card, whose rates are in turn higher than PIN debit card transactions. Sales that are not conducted in person, such as over the phone or Internet, have higher interchange rates, apparently due to their increased risk of fraud.    What are Interchange Fees?Why are They Hidden?What Else Has Congressman Cannon Done to Put Money Back in My Pocket?Outside Information – Get Information From Organizations Dedicated to Encouraging Free Market Capitalism on This Issue

“Retailers Welcome Antitrust Legislation Addressing $40 Billion in Hidden Credit Card Fees” (Via NRF News Release)

[Via Businesswire, March 6, 2008]

WASHINGTON–The National Retail Federation today welcomed the introduction of landmark antitrust legislation that would address hidden MasterCard and Visa fees that cost merchants and their customers more than $40 billion a year.

“This legislation would use the nation’s antitrust laws to rein in the greed of the credit card companies,” NRF Senior Vice President Mallory Duncan said. “With the rapidly increasing use of plastic, credit card companies and their banks are seeing a windfall that is costing U.S. consumers tens of billions of dollars each year. These are fees that most consumers don’t even know they’re paying because Visa, MasterCard have tried to keep them secret. The introduction of this legislation marks the beginning of the end of credit card company rip-offs.”

“Rather than allowing these fees to continue to be set in secret and imposed on a take it or leave it basis, this legislation would require negotiations and allow retailers to seek fair terms and conditions that will ultimately mean a better deal for consumers,” Duncan said. “Consumers are already angry at the way they’ve been treated by credit card companies, and this bill is an important step toward making credit card companies treat both merchants and their customers with respect.”

The Credit Card Fair Fee Act was introduced today by House Judiciary Committee Chairman John Conyers, D-Mich. The bill is the first attempt by Congress to address credit card interchange fees, and is the outcome of a hearing held in July 2007 where Duncan, testifying on behalf of NRF and the Merchants Payments Coalition, argued that interchange practices violate federal antitrust law.

Averaging close to 2 percent, interchange is a fee Visa and MasterCard banks charge merchants every time a credit card or signature debit card is used to pay for a transaction. Visa and MasterCard collected an estimated $42 billion in interchange fees in 2007, an increase of 17 percent over the previous year and 150 percent since 2001.

Interchange is largely unknown to most consumers because Visa and MasterCard don’t disclose the fee on monthly statements and effectively keep merchants from disclosing it on receipts. But Visa and MasterCard effectively require merchants to pass the fees on to consumers by requiring them to be included in the advertised price of items and making cash discounts difficult. The fees amount to about $350 per household each year.

The Conyers bill would require credit card systems possessing “substantial market power” to negotiate with merchants to reach a voluntary agreement on credit card terms and conditions. If an agreement cannot be reached, both sides would be required to submit to binding arbitration by a three-judge panel appointed by the Department of Justice and Federal Trade Commission.

The arbitration proceedings would take place with a limited 60-day discovery period and other statutory deadlines, and the judges would be required to apply a market standard reflecting a perfectly competitive system where neither side had market power. Terms and conditions set by the panel would be in effect for three years, at which time the process would repeat itself. Both sides would receive limited immunity from antitrust laws in order to participate in the process.

The legislation requires that terms and conditions set under the process be available to any merchant regardless of size, industry or location. Individual merchants or groups of merchants would remain free to negotiate voluntary arrangements with credit card companies and their banks.

NRF is leading retailers’ fight against soaring interchange costs. During last summer’s testimony before the Judiciary Committee’s Antitrust Task Force, Duncan explained to lawmakers how Visa and its member banks come together to set interchange rates that all banks agree to charge regardless of which bank’s name is on a card. MasterCard follows a different procedure that also results in all its banks agreeing to charge the same. In either case, the two card associations each operate as illegal price-fixing cartels in violation of antitrust law, he said. With Visa and MasterCard together controlling at more than 80 percent of credit card purchase volume, retailers cannot afford to refuse the cards, he said.

The National Retail Federation is the world’s largest retail trade association, with membership that comprises all retail formats and channels of distribution including department, specialty, discount, catalog, Internet, independent stores, chain restaurants, drug stores and grocery stores as well as the industry’s key trading partners of retail goods and services. NRF represents an industry with more than 1.6 million U.S. retail companies, more than 25 million employees – about one in five American workers – and 2007 sales of $4.5 trillion. As the industry umbrella group, NRF also represents over 100 state, national and international retail associations. www.nrf.com

Credit Card Price Fixing Suit Could Cost Industry Over $100 Billion, Experts Say (Banking Business Review)

[Repost, Jan 27, 2006]

“According to a group of prominent bankers, a lawsuit brought by retailers in the US alleging a number of major credit card issuers and banks colluded to fix processing prices will have far reaching consequences for the industry at large if it is successful…”

Click here to view the article in “Banking Business Review”

____________________________________________________

Want to know more about lead plaintiff ScanMyPhotos.com?  Click here and read their daily blog: Tales from the World of Photo Scanning