Wells Fargo Cancels Lavish Wynn Hotel Event

During the past few weeks, we have tempered our discussions of the failing bank, along with MasterCard and Visa’s roll in devastating the global economy.  One issue we are not reading, amidst the record job losses and banking mismanagement is why the credit card giants aren’t lowering their anticompetitive merchant interchange fees?

At our company, we are reaping strong returns, due to our innovative new photo imaging business model at ScanMyPhotos.com. We reinvented our business, while Visa and MasterCard simply charged more for supporting and antiquated pricing model as its technology leaped ahead of what was once an analog payment network. 

Their actions help fuel our amplified commitment for calling attention to Visa and MasterCard’s unfair merchant interchange rates and its member banks continued monopoly of  charging nearly $60 billion in antiquated annual interchange fees when you use a credit and debit card.

Other businesses are struggling to survive, but we are more determined than ever to win this litigation.  Many member banks have failed and some CEO’s have been dismissed.  However, their allegedly illegal price-fixing and ruinous financial burden on merchants and consumers continues.

Today, we learn that Well Fargo, a named defendant in the multi billion dollar merchant interchange litigation has decided that The Wynn Hotel in Las Vegas is not the place to host their upcoming event for their home lending unit.  The same for Citigroup (another named defendant) for trying to spend $50 million of taxpayer dollars on a corporate jet. 

As millions of jobs are lost and our economy rests on the brink of collapse, the least MasterCard and Visa can provide is immediate relief from their anticompetitive and illegally-based price-fixing scheme.  If Denny’s can give away free breakfasts after the Super Bowl, think of the marketing grist that MasterCard and Visa would gain from saving retailers and consumers billions of dollars.

“Citigroup, U.S. in Talks to Create ‘Bad Bank'” (via WSJ)

“Citigroup Inc. is nearing agreement with U.S. government officials to create a structure that would house some of the financial giant’s risky assets, according to people familiar with the situation.” (source: WSJ)

Commentary: Wouldn’t it be nice if all businesses could restructure their bad assets to create a phony holding company to pretty up their books?  Will the government also be acquiring the bank’s legal liabilities, including the multi billion dollar merchant interchange antitrust class-action for which Citigroup is a named defendant?  As a part owner, will the U.S. demand that Citigroup’s ownership in Visa and MasterCard be used to leverage away the unfair credit card interchange fees?

More on Visa Inc.

Form 10-K for VISA INC.

Visa says might incur “significant” charges in FY09

The Credit Card Fee That Will Fleece You

Visa and MasterCard’s Impact From Banking Instability and Upheavel

Another outcome from the global banking crisis, including today’s news that Citigroup will acquire the banking operations of Wachovia, raises added concerns. While the banking industry’s two giant credit card associations want consumers to think that Visa and MasterCard play fairly, do not violate the law and offer boundless competition within the credit card market, the reality is that the banking industry consolidation is yielding an even more unstable and a more tilted playing area. 

Banks are defaulting and being nationalized.  How will this impact their credit card operations and will they attempt to further raise merchant interchange fees in an attempt to strengthen their balance sheets on the backs of businesses and consumers?

After Visa and MasterCard went public in an attempt to shift ownership from the banks, now many of the leading banks are consolidating and their percentage of control is creeping back.  JP Morgan Chase, Bank of America and Citigroup, all named defendants in the Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, are amassing assets and extending their cartel-like market power over the electronic payment system.

Consumers and businesses have lost confidence in the banking industry. Its corporate leaders are under fired, or have been fired. Government intervention at this late hour is doomed and the question remains: why didn’t the government clamp down on the trillions in unstable and ruinous mortgages years ago. A similar question is why did the government permit banks to reap hundreds of billions in anticompetitive and unfair fees at the expense of merchants and consumers?

While the banking crisis is taking all the attention, merchant interchange fees continue to slice away at our nation’s economy.  These fees generate nearly $50 billion each year at the expense of Americans; it removes much needed capital from our economy and is aggressively plundered by the banks as we are learning on the failed housing market and other disastrous schemes.

According to The Wall Street Journal (Sept 29), “Citigroup has put up for sale a Japanese call center valued at about $2 billion, the latest push by the financial conglomerate to drum up fresh capital.”  If the banks are desperately seeking cash, as a merchant, I am extra worried that they will again hit up their interchange pricing fiefdom to  get fast cash at the expense of retailers and consumers. 

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? 

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

“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.

“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  

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

Click here to read Floyd Norris, chief financial correspondent for The New York Times’ comments on the Visa IPO and where the use of proceeds would be going. [Read the Visa prospectus]

As entrepreneurs, if we were to seek funding, our investors would require that the proceeds be used to invest in the future expansion of ScanMyPhotos.com, not pay off debt and cover legal bills.  They will also dilute the banks’ ownership if the legal liability is greater than $3 billion; this suggests that Visa is understanding that our liability will be greater than $3 billion.   

If you thought the banks were mismanaged before, due to their mortgage meltdown, the Visa IPO is a study in supra-competitive greed – which is exactly what their interchange fees are all about. 

As with MasterCard, a proportionally large amount of capital will be placed in escrow to cover their legal liability to us.  And, just as with MasterCard, the proceeds will also be used to contribute fresh cash to the banks.   Mr. Norris covered many of the strange maneuvers that Visa Inc is preparing and hoping the public overlooks, due to their intoxication with the MasterCard valuations.  Perhaps the most significant concern is their SEC-filed Risk Factors, and identifying that if our litigation is successful, the giant credit card association risks insolvency.  Insolvency!

We think the reason for the IPO is to demonstrate that Visa is not owned and controlled by the banks; that’s part of our assertion in the antitrust litigation.  So, just as with MasterCard, they paint the appearance that now shareholders are running the show.  Unlike regular publicly held corporations, see what happens if a business tries to acquire a majority of its stock.  See what happens if a company wanted to start from the top floor and buy their own electronic payment card network by acquiring Visa.  They cannot.

As identified in the New York Times article, this is a giant conflict of interest shell game.  JP Morgan Chase is a lead defendant and co-owner of Visa.  They also own Chase and Chase Paymentech Solutions – the credit card processing behemoth.  Yet, the bank is a lead underwriter and we guess already have their track shoes on to make this deal happen super-fast, while the red paint from their impending liabilities are still wet.  Other lead defendants are poised to also cash out in the hundreds of millions of dollars, just as they did (to a lesser level) with MasterCard.  But, not so fast, read this posting about the impending troubles facing MasterCard’s IPO.

“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

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

Here we go again.  But, this time the ride is pitched at a much steeper angle than the previous MasterCard IPO.  The thousands of banks which partly cashed out when they unloaded about half of their MasterCard investment are now poised to go full throttle and launch what will be America’s largest IPO ever. 

The numbers are big, as is the potential liability.  According to Visa’s SEC flings, if our antitrust litigation against their collusive price-fixing practices gains momentum, Visa Inc could become insolvent. 

During the following weeks, we will be closely following and posting regular updates and commentaries on the IPO and call attention when hype gets in the way of facts.

Click here for latest Bloomberg update by Elizabeth Hester

Click here for an update on out complaint against MasterCard’s IPO.

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

CNBC: “Citigroup May Write Down As Much As $24 Billion, Fire 20,000 Employees”

Click here for more info.

Who’s Running the Banks?

With today’s news that several major financial institutions’ stocks again plunged, we can’t help but wonder what type of inept leadership is controlling the banks?   With warnings of fourth-quarter write-downs and loan losses from billions in faulty and misguided subprime mortgages, the banks’ leadership is extra weak.  These are the same leaders who we assert sat around the board tables at Visa and MasterCard and conspired to illegally fixed merchant interchange fees.  After a while, these billions in missteps start adding up.  

 [commentary: WayTooHigh.com]

Citigroup’s New CEO: Encouraging

As a retailer and ecommerce business, we are encouraged that Citigroup Inc. has appointed Vikram Pandit as chief executive, because he doesn’t come with the hefty baggage that other, more well-known insiders have. Because he has never led a public company, let alone one facing billions in antitrust violations, this might be the turning point that merchants are seeking to regain credibility and question the bank’s (alleged) price-fixing allegations by setting merchant interchange fees by agreement.  According to Reuters, Mr. Pandit has “no experience leading a consumer business,” so we hope his first lesson will be to study WayTooHigh.com and the millions of other merchants’ disdain for the supracompetitive electronic payment fees. Citigroup is a member bank of both MasterCard and Visa’s shared cartel and as we assert, has conspired to collectively fix credit card interchange fees.

We wonder whether Mr. Pandit will shift direction and take responsibility for the bank’s violations?  Certainly, this would be a smart and prudent way to restore confidence in Citigroup.

[commentary: WayTooHigh.com]

Interchange Fees are Obsolete as VHS Video Tapes

During the holiday season, look around.  Can you find any VHS cassettes to record television programs on?  How about super-8mm movie film?  8-track tapes?  3 /12″ floppy discs?  Catching on?

Merchant interchange fees are one of the few holdouts from the pre technology explosion, from before TiVo, MySpace, Youtube and the iPhone.  The electronic payment network is today what computer storage devises were years ago.   With consumers increasingly relying on their computers to safe keep their valuable digital libraries, Western Digital’s My Book storage system provides users a safe place to secure up to one terabyte (1 TB) of digital content.  In the mid-1990’s that hardware would cost about a million dollars and fill an entire room, today it is under $500 and is the size of a few cell phones.   With “Moore’s Law”, technology is getting faster and prices cheaper.  Except, when you have unbridled market power and control a system that is obsolete.  It is like a drug addict who only knows how to stay in a daze. 

But, we are awaking Visa and MasterCard and reminding them that their once impenetrable interchange fee fiefdom is on the verge of distinction.  Other countries have got smart and demand rates be lowered, in some cases to a tiny fraction of those fees in the U.S., even though our nation is among the most technology advanced, our communications infrastructure should mean it costs less to transmit data, and third-world fraud rates have to be higher, yet they too pay a tiny fraction of our near record merchant interchange fee prices.  Technology today is so super-fast, just like our high speed ScanMyPhotos.com picture scanning – we cannot help but lower prices. 

Even though the banks are reporting huge problems from its mortgage mess, they would not be allowed to wield their anti-competitive power to artificially hold up what are now obsolete fees to help cover their other mistakes.  We understand that only about 13% of all interchange fees are used to actually cover the transactional costs. 

[Commentary: WayTooHigh.com] 

Why Visa, MasterCard and its Member Banks Are Accused of Illegal Price-Fixing by Agreement

We found this very simple defination of price-fixing on the Wikipedia site [click here for more info].

Price fixing is an agreement between business competitors to sell the same product or service at the same price. In general, it is an agreement intended to ultimately push the price of a product as high as possible, leading to profits for all the sellers. Price-fixing can also involve any agreement to fix, peg, discount or stabilize prices. The principal feature is any agreement on price, whether express or implied. For the buyer, meanwhile, the practice results in a phenomenon similar to price gouging.

Methods of price fixing will include selling at a common target price; setting a common “minimum” price; buying the product from a supplier at a specified “maximum” price; adhering to a price book or list price; engagement in cooperative price advertising; standardizing financial credit terms offered to purchasers; using uniform trade-in allowances; limiting discounts; discontinuing a free service or fixing the price of one component of an overall service; adhering uniformly to previously-announced prices and terms of sale; establishing uniform costs and markups; imposing mandatory surcharges; purposefully reducing output or sales; or purposefully sharing or “pooling” markets, territories, or customers.

Generally, price fixing is illegal, but it may nevertheless be tolerated or even sanctioned by some governments at various times, particularly among those whose countries are developing economies. See also Collusion.

In neo-classical economics, price fixing is inefficient: the anti-competitive agreement by producers to fix prices above the market price transfers some of the consumer surplus to those producers and also results in a deadweight loss.

In the United States, price fixing can be prosecuted as a criminal felony offense under section 1 of the Sherman Antitrust Act. ^[1] In Canada, it is an indictable criminal offence under section 45 of the Competition Act. Bid rigging is considered a form of price fixing and is illegal in both the United States (s.1 Sherman Act) and Canada (s.47 Competition Act). In the United States, agreements to fix, raise, lower, stabilize, or otherwise set a price are illegal per se.^[2] It does not matter if the price agreed upon is reasonable or for a good or altruistic cause; or if the agreement is explicit and formal or unspoken and tacit. In the United States, price-fixing also includes agreements to hold prices the same, discount prices (even if based on financial need or income), set credit terms, agree on a price schedule or scale, adopt a common formula to figure prices, banning price advertising, or agreeing to adhere to prices that one announces. ^[3] Although price fixing usually means sellers agreeing on price, it can also include agreements among buyers to fix the price at which they will buy products.

Under American law, exchanging prices among competitors can also violate the antitrust laws. This includes exchanging prices with either the intent to fix prices or if the exchange affects the prices individual competitors set. Proof that competitors have shared prices can be used as part of the evidence of an illegal price fixing agreement. ^[4] Experts generally advise that competitors avoid even the appearance of agreeing on price. ^[5]

Under U.S. law, price fixing is only illegal if it is intentional and comes about via communication or agreement between firms or individuals. It is not illegal for a firm to copy the price movements of a de facto market leader called price leadership, which has been seen to be the case in markets for breakfast cereals and cigarettes. But informal agreements or unspoken agreements to fix price also can violate the antitrust laws. The price-fixing laws apply to industries and professionals, for-profit concerns and non-profits and charities. ^[6] The United States Department of Justice Antitrust Division and United States Federal Trade Commission are responsible for enforcing federal price fixing laws; see also Sherman Antitrust Act. The Department of Justice handles both criminal and civil cases. As of 2004 under US law corporations may be fined up to $100 million for criminal price fixing; individuals can be charged and sentenced to prison sentences of up to 10 years for price-fixing violations. The Federal Trade Commission can prosecute firms for price fixing as a civil matter. Many State Attorneys General also bring antitrust cases and have antitrust offices, such as Virginia, New York, and California. Private individuals or organizations can bring their own lawsuits for triple damages for antitrust violations and also recover attorneys fees.

[Source: Via Wikipedia]

Merchant Interchange Distraction (WayTooHigh.com)

We couldn’t help but notice today’s news that Citigroup is again facing [$15] billions is write-offs from its mortgage losses. 

Along with other major banks, you would think that when they gathered together to illegally fix merchant interchange rates, they would have also discussed why the other house of cards was poised to crash. The major banks are accused by us and others of violating antitrust laws by fixing prices. 

The same banks that were represented on the Visa and MasterCard boards, are also the ones facing billions in losses from the subprime mess. Where was the leadership?  With all the top-level terminations, it is clear there was huge mismanagement. 

Were they too focused on violating the Sherman Antitrust Act to recognize that the phony mortgage business would have to crash too?  While studying how they schemed to create billions each year in the name of interchange fees, they should have, instead been questioning what would happen to the “homeowners” when their no-interest mortgages’ lapsed.  It turns out that people were renting homes, as they had no equity invested.  Although all the media attention is on the banks’ mortgage mess, our litigation has the potential to be even greater and more overwhelming.

[commentary: WayTooHigh.com]