Millions of retailers have been damaged by Visa and MasterCard and the profound impact from billions of dollars each year being charged as a hidden tax on consumers and retailers. Over the years, many, including ScanMyPhotos.com have been so angered by the banks anticompetitive, price fixing by agreement that they wanted to respond and act.
Overview: America’s largest banks are accused of unlawfully fixing the merchant credit card fees from transactions over the Visa and Mastercard networks. They also allegedly enact restrictions that prevent merchants from protecting themselves against those fees. In this complaint, two nationwide classes of merchants seek monetary damages to compensate them for the overcharges caused by this llegal conspiracy and equitable relief to protect themselves against continuing and future harm.
April 25, 2006 – First Consolidated Amendment – Class Action Complaint. “PAYMENT CARD INTERCHANGE FEE AND MERCHANT-DISCOUNT ANTITRUST LITIGATION”
Among the charges are that Visa and MasterCard’s Board of Directors are alleged to have fixed, raised and conspired to set Interchange fees in violation of Section 1 of the Sherman Act. It is unlawful to fix prices. It is also illegal to restrain trade. Visa and MasterCard are being accused of protecting their monopoly by ensuring that no competitor gains significant market power. The amended class action complaint was filed today in the U.S. District Court Eastern District of New York.
Key points of distinction, as identified within the amended complaint. Did you know that:
1) Visa and MasterCard do not use the Interchange Fees to fund their operations.
2) Visa and MasterCard’s Member Banks charge an Interchange Fee to merchants, even when the issuing and acquiring banks are the same entity.
3) Interchange Fees helped pay for the costs of initial card issuance, marketing, transferring transactional paper between the acquiring and issuing banks. This was necessary to induce banks to issue and support the card networks. The networks no longer transfer large numbers of paper receipts (remember the manual credit card imprinters, and multi-layered carbon-copy forms?). Thus, Interchange fees are no longer cost-based.
4) Merchants have no choice but to accept Visa and MasterCard’s dominant credit cards and their forced, supracompetitive level of Interchange fees. Nearly every merchant that accepts Visa payment cards also accepts MasterCard as a form of payment; there is little distinction between the two. A Visa transaction is indistinguishable from a MasterCard transaction. Both share identical relationships among the same Member Banks.
5) Today’s credit card network could function effectively without uniform, collectively fixed Interchange fees.
6) Every major U.S. bank is a member of both Visa and MasterCard’s associations and the memberships are virtually identical.
7) The collective setting of uniform Interchange fees restrains competition and elevates the merchant discount fees to supracompetitive levels. Visa and MasterCard and the defendant banks are direct horizontal competitors of each other, engage in unlawful contracts, conspiracies and practice unreasonable restraint of interstate trade or commerce in violation of the Sherman Antitrust Act. And, all the Member Banks of Visa and MasterCard have actual knowledge of, and have knowingly participated in the conspiracy.
Visa and MasterCard use their market power by “price discrimination” in the level of Interchange fees charged to various merchants. They also force their premium credit cards (signature cards) upon merchants to accept and charge higher Interchange fees than non-premium cards. Merchants are thus subsidizing cardholders frequent flyer and other reward points.
9) There are significant barriers to entry for other card brands to enter the market. Because of these barriers, the only successful market entrant since the 1960′s was Discover and today it would cost over $1 billion to enter the market, but still face problems with developing a separate merchant acceptance network.