* Eight years on, stores again claim antitrust violations
* Plaintiffs say credit-card rules cost $50 bln yearly
* Card companies deny anti-competitive effects
By Jessica Dye
NEW YORK, Nov 2 Nearly eight years after Visa Inc and MasterCard Inc agreed to pay more than $3 billion
to resolve allegations that they conspired to raise stores' fees
for processing their payment cards, merchants returned to court on
Wednesday to argue that the card companies still maintain a costly
stranglehold on interchange networks.
U.S. District Judge John Gleeson heard oral arguments in
Brooklyn federal court from a slate of lawyers representing the
credit card companies, their issuing banks and the merchants over
whether to proceed to trial on the latest round of antitrust
allegations against the card companies' and banks' interchange
networks, which process customers' credit- and debit-card payments
The case raises similar claims to another consolidated set of
cases in Brooklyn federal court, first filed by retailers
including Wal-Mart and Sears in 1996. Visa and MasterCard
settled those cases with a $3.05 billion payout to merchants. But
that settlement only covered conduct before Jan. 1, 2004;
according to the plaintiffs in the latest round, the companies'
anti-competitive conduct has continued virtually unchanged since
This time around, the plaintiffs -- who include D'Agostino
Supermarkets Inc and Payless ShoeSource -- contend that the card
companies' liability could be much higher. According to their
estimates, monetary damages could run into the tens of billions of
dollars -- a figure the companies deny.
Craig Wildfang, an attorney representing a proposed class of
stores that accept Visa and MasterCard cards across the country,
said that rules preventing stores from offering customers
discounts for paying in cash or steering them toward less costly
forms of payment, such as cash or competitors' cards, are costing
merchants an estimated $50 billion each year.
'OBSTRUCTS AND ELIMINATES' COMPETITION
The credit card companies and issuing banks such as JPMorgan
Chase & Co and Citibank NA -- both among those named
as defendants in the lawsuits -- are "acting in concert" to keep
merchants from finding ways to offset or mitigate credit-card
costs, Wildfang said, and preventing alternative payment forms
from making headway in the narrow payment-services market.
Paul Slater, an attorney representing plaintiffs including QVC
IncSupervalu Inc in individual lawsuits
against the companies, told Gleeson that the effect of the card
rules has been to "stop merchants from using price signals at the
point of sale to direct the customer" to other payment forms.
"The inability of the merchants to price the use of Visa and
MasterCard cards eliminates horizontal competition and obstructs
and eliminates interbrand competition," Slater said.
The card companies and banks maintained that the interchange
rules are legal and "reasonably necessary" to provide customers
with certainty about how their card payments will be processed,
according to Peter Greene, a lawyer for JPMorgan.
"The level of interchange is not the result of any
anti-competitive conduct," Greene said, comparing the companies'
actions "to a sports league setting up the rules of the game,"
rather than conspirators acting to fix the game.
INCREASED OUTPUT 'EVIDENCE OF COMPETITIVE' PRODUCT
Robert Vizas, an attorney for Visa, argued that despite the
plaintiffs' allegations that card companies' behavior has stifled
payment markets, the growing use of debit and credit cards at
stores around the country demonstrates that the opposite is true.
"If you can increase your output, that is at least equally
evidence of a competitive as opposed to an anti-competitive
product," Vizas said.
Gleeson reserved his ruling on the summary judgment motions
following the arguments. Discovery has already been completed in
the case, resulting in the production of about 82 million pages of
documents and nearly 500 witness depositions, according to court
Visa and MasterCard reached a settlement last year with the
U.S. Department of Justice over their interchange-fee practices.
The companies agreed to allow merchants to offer incentives to
customers who use a particular payment method and to let customers
know the costs incurred by using a particular method, such as a
The case is In re: Payment Card Interchange Fee and Merchant
Discount Antitrust Litigation, in the U.S. District Court for the
Eastern District of New York, no. 05-1720.