Throughout the next two weeks, as the world gathers together to celebrate the Olympic Games, millions of businesses worldwide are sure to take note of Visa Inc’s Olympic sponsorship. While the company poses as a friend to consumers, each time you watch a Visa Inc. TV commercial, remember that they are part of what could be the nation’s largest illegal antitrust conspiracy. As a lead plaintiff and included among the first to launch the payment card interchange fee and merchant discount antitrust litigation, I anticipate many opportunities to review and comment on Visa Inc’s Olympic marketing campaigns.
From the complaint filing, here are several points of interest:
For over 40 years America’s largest banks have unlawfully fixed the fees imposed on merchants for transactions processed over the Visa and MasterCard Networks and have collectively imposed restrictions on merchants that prevent them from protecting themselves against those fees. Despite the Networks’ and the banks’ recent attempts to avoid antitrust liability, their conduct continues to violate the Sherman Act.”
All of the Bank Defendants belong to both networks and have conspired with each other and with the Visa and MasterCard Associations to fix the level of Interchange Fees that they charge to merchants. Many of the Bank Defendants are, or were during the relevant period, represented on the Visa and/or MasterCard Boards of Directors at the times when those Boards collectively fixed uniform Interchange Fees and imposed the anticompetitive Anti-Steering Restraints and Merchant Restraints, tying and bundling arrangements, and exclusive-dealing. The Bank Defendants delegated to the Visa and MasterCard Boards of Directors the authority to take those actions. Each of the Bank Defendants had actual knowledge of, participated in, and consciously committed itself to the conspiracies alleged [within the complaint].
Bank Defendants are therefore directly responsible for collectively fixing Interchange Fees within each Network and between the two Networks. Bank Defendants, acting by and through the Boards of Directors of Visa and MasterCard, are also directly responsible for the tying and bundling of separate and distinct services together in those Interchange Fees, the imposition of the Anti-Steering Restraints and engaging in the other anticompetitive conduct alleged herein. Collectively, the Bank Defendants, through their operation of Visa and MasterCard, adopted and approved the above-mentioned policies and have significantly profited from those policies.
Even after the corporate restructuring of the Visa and MasterCard Networks, the banks have remained intimately involved in the imposition of supracompetitive interchange fees on merchants. Acquiring banks enter into acceptance contracts with merchants agreeing either implicitly or explicitly that the Networks’ uniform schedule of interchange fees will apply to all of the merchant’s transactions that are initiated by Visa or MasterCard Payment Cards. These Acquiring Banks understand that the same uniform schedule of Interchange Fees will be applied to transactions conducted by all other Acquiring Banks for those banks’ merchant customers. Issuing Banks enter into issuing contracts with the Networks, agreeing and understanding that they will receive Interchange Fees from merchants based upon the Networks’ uniform schedule of Interchange Fees.
Visa and MasterCard “are not single entities; they are consortiums of competitors”. Before the corporate restructuring, they were “owned and effectively operated by over 22,000 banks, which compete with one another in the issuance of Payment Cards and the acquiring of merchants’ transactions.” Because of this judgment, among other things, the Networks and their member banks recognized that the Networks were “structural conspiracies” and “walking conspiracies.”
Various persons, firms, corporations, organizations, and other business entities, some unknown and others known, have participated as co-conspirators in the violations alleged and have performed acts in furtherance of the conspiracies. Co-conspirators include, but are not limited to, the following: (a) Issuing Banks that have issued Visa and/or MasterCard Credit and Debit Cards and have agreed to charge uniform, collectively fixed Visa and MasterCard Interchange Fees for various merchants and transactions; (b) certain banks that are or were members of the Boards of Directors of Visa or MasterCard and adopted and agreed to fix Interchange Fees for various merchants and transactions and to impose the anticompetitive Anti-Steering Restraints and Miscellaneous Exclusionary Restraints alleged herein; and (c) Acquiring Banks that acquire Visa and MasterCard transactions from members of the Classes, and that have participated in the conspiracy to collectively fix Interchange Fees.
Whether (a) Visa and its member banks, and (b) MasterCard and its member banks illegally fixed uniform schedules of default Interchange Fees for Credit-Card transactions, which
were imposed on merchants in the market for Network Services for such cards, thereby extracting supracompetitive Interchange Fees and Merchant Discount Fees from members of the Classes; Whether (a) Visa and its member banks, and (b) MasterCard and its member banks illegally fixed uniform schedules of default Interchange Fees for Offline-Debit-Card transactions,
which were imposed on merchants in the market for Network Services for such cards, thereby extracting supracompetitive Interchange Fees and Merchant Discount Fees from members of
the Classes; Whether (a) Visa and its member banks illegally fixed uniform schedules of default interchange fees for Interlink Offline-Debit-Card transactions, which were imposed on merchants in the market for Network Services for such cards, thereby extracting supracompetitive Interchange Fees and Merchant Discount Fees from members of the Classes;
iv. Whether Visa, MasterCard and their member banks possess or exercise market power or monopoly power in the markets alleged in this Complaint; Whether Visa and MasterCard and their dual member banks conspired with each other to fix the price of Interchange Fees imposed on the Classes in the relevant market; Whether the merchant restraints imposed by Defendants
facilitated Defendants’ respective price-fixing arrangements; Whether the conspiracies of the Visa and MasterCard Networks continued after the Networks’ reorganizations and IPOs; and Whether the per se rule or the rule of reason should be applied to analyze the price-fixing schemes of Visa, MasterCard, and their respective member banks.
b. Monopolization issues. Whether Visa and its member banks exercise market power or monopoly power that was willfully acquired and/or maintained, in various markets as alleged in this Complaint; and; Whether MasterCard and its member banks exercise market power or monopoly power that was willfully acquired and/or maintained, in various markets as alleged in this Complaint.
c. Impact and damages issues. Whether virtually all class members were overcharged for Visa and MasterCard transactions when higher Interchange Fees were extracted from them than could have occurred in a competitive market; Unlike Payment-Card transactions in other jurisdictions, the fees imposed by banks on merchants for Payment-Card transactions in the United States are almost completely unregulated by any level or unit of government. Rather, those fees, and the rules that apply to all Payment Card transactions, are privately and comprehensively regulated by Visa, MasterCard, and their member banks. Thus, the Relevant Market alleged in this complaint can reach an equilibrium between supply and merchants’ demand for those services only if market forces are effective. At all times relevant to this action, Visa, MasterCard and their member banks have conspired to restrain these market forces.