$25 Oil vs. $60 Billion Visa & MasterCard Interchange Fees?

December 4, 2008

The greedy banks and auto industry execs failed their shareholders and Americans. Their mismanagement is being rewarded with billions, or is it trillions in free money?

Everything has turned upside down.

Accountability is irrelevant and Washington lobbyists are all powerful.   Look at today’s Merill Lynch & Co assessment that oil might soon be trading at just $25 a barrel, according to a Bloomberg report.   If gas can plunge from nearly $150 to under $50 in just a few weeks, due to the economic seizure, why are the Visa and MasterCard merchant interchange fees – fueled by its member banks – continuing to rise? 

Something is very broken and wrong.

Tulips, Silver, Housing Market and Oil Speculators Have Nothing on MasterCard and Visa

WayTooHigh.com: Influencing Opinions and Raising Awareness

March 25, 2008

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 “adjustmentletter 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

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

March 19, 2008

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


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

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

February 26, 2008

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

More Interchange Revenue Centers

January 23, 2008

Merchants already are forced to pay from upwards of one-hundred separate interchange fees.  Few understand how these charges work, and even we didn’t know of one of the added chargeback programs.

Even though we are the lead plaintiff in the merchant interchange litigation and co-editors of WayTooHigh.com – The Credit Card Interchange Report, we didn’t know about the “chargeback fees.”

30 Minute Photos Etc and our ecommerce business, ScanMyPhotos.com might have had under a dozen chargeback requests over the past 17-years.  These are generated when a customer questions a specific electronic payment charge.

Just today, we received a multi-page chargeback notification from Visa USA domestic. The customer disputed a charge from early December and reported that it was a duplicate processing charge for the same order. The fact was this customer placed two separate orders for differing amounts over the span of a few days.

As a merchant, our account was immediately dinged for the full amount. A financial adjustment was made to our account as a result of the chargeback initiation.  While were were offered to dispute the charge, which we did, Chase Bank USA already took the money back.  Can you imagine that?  Ok, we are the lead plaintiff, suing JPMorgan Chase and the other member banks, along with Visa and MasterCard for what could be multiple billions of dollars, but did they have to be so petty?

What happens when other merchants overlook those chargeback notifications?  Funds could also be automatically withdrawn and if not challenged, lost.  Also, what happens to the interchange fee that we initially paid?  Would a disputed charge still have to incur an interchange fee?

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

November 21, 2007

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]