Merchants sue MasterCard, Visa over ‘exorbitant’ interchange rates

June 28, 2005

Internet Retailer – Strategies for Multi-Channel Retailing leads five merchants in filing a class action suit charging MasterCard International, Visa International and their merchant banks with illegally fixing interchange rates—the fees merchants must pay to accept credit cards.

Five merchants have filed a class action suit charging MasterCard International, Visa International and their merchant banks with illegally fixing interchange rates—the fees merchants must pay to accept credit cards.


Lead plaintiff in the lawsuit—filed last week in U.S. District Court in Connecticut—is, a national online boutique photo service. The lawsuit asks for an injunction to prevent the two card associations and their members from collectively setting interchange fees and asks for yet-to-be determined damages.

The suit contends that the two card associations conspire to set interchange rates, causing merchants to pay supra-competitive and exorbitant fees for card acceptance. Merchant acquirers typically pass increases in interchange on to the merchant in the form of higher discount rates. As a result, the interchange fee acts as a minimum merchant discount fee, according to the lawsuit.
In the suit, the merchants also argue that because Visa and MasterCard have combined market share of 73% of the general-purpose card market, they can raise interchange fees without losing merchants.

The merchants also contend that increases in interchange are not based on increased costs. “Interchange fees are just a way that credit card companies squeeze merchants to enhance their revenue stream,” says Mitch Goldstone, president and CEO of 30 Minute Photos Etc. “There’s absolutely no need for these fees to be so high.”

Online retailers especially have little recourse but to accept the fees because 100% of their businesses require credit card acceptance, Goldstone says.

In a statement, Noah J. Hanft, MasterCard general counsel, said that the lawsuit is “misguided, and MasterCard looks forward to defending interchange, which is necessary for the operation of a four-party system and has been found lawful, efficient and pro-competitive.”

Visa would not discuss specifics of the suit. But in a statement, Paul Cohen, vice president of Visa USA, said that the association plans to “vigorously defend interchange—a business practice that has been both successful in the marketplace and found to be legal in federal court.”

Credit Card Fees Draw Lawsuit By Merchants

June 27, 2005

Credit Card Fees Draw Lawsuit By Merchants

The National Retail Federation explains why the interchange fee case is so important to all merchants and consumers.

Click here to view article

(Gazette-Times; Knight Ridder Newspapers)

TV-News 14, Charlotte NC – Watch the video link

June 25, 2005

To watch video coverage of the credit card lawsuit from TV-News 14 in Charlotte, NC

Cliick here to watch video

Class-Action Suit Alleges Visa, MasterCard Fix Fees (DM News)

June 25, 2005

An antitrust class-action lawsuit has been filed against Visa, MasterCard and several major U.S. banks on behalf of a group of merchants, alleging the fixing of credit card fees, law firm Robins, Kaplan, Miller & Ciresi LLP said yesterday.

Robins, Kaplan, Miller & Ciresi, Minneapolis, is representing merchants in the suit, such as 30 Minute Photos Etc., Irvine, CA; Traditions Classic Home Furnishings, St. Paul, MN; CHS Inc., also of St. Paul; A Dash of Salt, Bridgeport, CT; and KSARRA, Newtown, CT.

The suit, filed June 22 in U.S. District Court for the District of Connecticut, alleges practices by the defendants that cause merchants to pay “supra-competitive, exorbitant and fixed interchange fees for the acceptance of credit card payments,” according to the law firm.

“Merchants have little or no ability to negotiate with Visa and MasterCard for lower interchange fees, and these fees are a ‘hidden tax’ that raise prices paid by consumers for almost every product they buy,” Robins partner K. Craig Wildfang said in a statement.

Also named in the suit are Bank of America, Citibank, Bank One, Chase Manhattan Bank, JPMorgan Chase, Fleet Bank, Capital One and other banks.

This move was undertaken because prior litigation proved ineffective and regulatory action is unlikely, Wildfang said in the statement.

DMNEWSJune 24, 2005 By: Chantal Todé Senior Editor

Merchants Sue Banks Over Credit Card Fees – (WJLA – ABC News)

June 24, 2005

Merchants Sue Banks Over Credit Card Fees

(Click here to view story)

Suit Challenges Credit Card Fees – (

June 24, 2005

Suit Challenges Credit Card Fees

June 24, 2005 A class action lawsuit filed by several small businesses accuses Citigroup, Bank of America and other large banks of illegally fixing the price of credit card transaction fees.

Click here to view entire article


Companies Assert "Interchange Fee" On Every Charge Is Exorbitant And Unfair (Inc. Magazine)

June 24, 2005

Antitrust Suit Filed Against Visa, MasterCard

Companies assert “interchange fee” on every charge is exorbitant and unfair. By: Max Chafkin – Inc Magazine

June 24, 2005–Five small businesses filed a class action lawsuit in Connecticut Thursday charging that Visa and MasterCard have been illegally fixing the fees charged to merchants who accept their cards.

The suit alleges that by dictating so-called “interchange fees” — a percentage of the total sale that is charged to the merchant — Visa and MasterCard have created a non-competitive environment in which businesses cannot negotiate for lower rates. The lawsuit also seeks an injunction that would allow businesses to negotiate rates with member banks in addition to unspecified damages.
Fees vary depending on the type of card but are usually around 2%.

While Visa said that it is still reviewing the complaint, Paul Cohen, a Visa spokesperson, defended the fee structure in a statement as “a business practice that has been both successful in the marketplace and found to be legal in federal court.”

Interchange fees came under fire in 2003 when Wal-Mart settled with the card companies for $3 billion dollars. As part of the settlement, the retailer won the right not to accept certain high fee debit cards, which are generally favored by banks because they bring in high revenues. Card companies argue that the high-fee premium cards are good for merchants since they attract bigger spenders.

Mitch Goldstone, whose Internet photo service 30 Minute Photos Etc. is one of the companies bringing the suit, complained that the fees have forced him to raise prices. “It is a huge hidden tax on consumers,” he said.

Said Visa’s Cohen, “We believe the merchants in this suit are seeking to shift their normal costs of doing business onto someone else — the consumer.”