US merchants file suit against Visa, Mastercard and banks over fee fixing

Source: Robins, Kaplan, Miller & Ciresi

Robins, Kaplan, Miller & Ciresi L.L.P. has filed an antitrust class action lawsuit in the U.S. District Court for the District of Connecticut against Visa, MasterCard, Bank of America, Citibank, Bank One, Chase Manhattan Bank, JPMorgan Chase, Fleet Bank, Capital One and other major banks on behalf of merchants alleging collusive practices of their setting, by horizontal agreement, credit card interchange fees at supra-competitive levels. The Complaint seeks injunctive relief to stop the alleged anticompetitive practices plus damages.

The plaintiffs, Photos Etc. Corporation, doing business as 30 Minute Photos Etc., of Irvine, CA; Traditions Classic Home Furnishings of St. Paul, MN; CHS Inc. of St. Paul, MN; A Dash Of Salt, L.L.C. of Bridgeport, CT; and KSARRA, L.L.C. of Newtown, CT, represent a class of merchants that operate millions of commercial businesses throughout the United States that accept Visa and MasterCard as a form of payment. At issue are the alleged practices by the defendants that cause merchants to pay supra-competitive, exorbitant and fixed interchange fees for the acceptance of these credit card payments.

"Merchants have little or no ability to negotiate with Visa and MasterCard for lower interchange fees, and these fees are a 'hidden tax' that raise prices paid by consumers for almost every product they buy," says K. Craig Wildfang, a partner at Robins, Kaplan, Miller & Ciresi L.L.P., who represents the plaintiffs. "Visa and MasterCard have previously been found to have 'market power' in the relevant markets, so Visa, MasterCard and the banks now have the burden of proving that they have set the interchange fees at the correct competitive level. Even Visa's own economists admit that they cannot satisfy this burden. Due to Visa and MasterCard's market power, the United States has the highest credit card interchange fees among industrialized countries. Regulatory authorities in many other countries, from the European Union to Australia, have recently adopted measures to reduce interchange fees, but in the United States, it will take action by the courts to accomplish this."

"Prior litigation, which challenged narrow aspects of Visa and MasterCard's collusive conduct, has proven ineffective at restraining the increase in credit card interchange fees, and as regulatory action is unlikely, class action litigation is the only alternative that offers merchants any prospect for relief from high, and rising, interchange fees. The card issuing banks that control Visa and MasterCard have the ability to set the interchange fees as high as they want, without any market force to restrain them," says Wildfang, who is leading the litigation at the Firm with attorney David A. Balto, and others. Co-counsel is Richard Bieder of Koskoff, Koskoff & Bieder PC in Bridgeport, CT.

"Interchange fees are just a way that credit card companies squeeze merchants to enhance their revenue stream. There is absolutely no need for these fees to be so high, and without anything to control them, the banks and the credit card companies continue to find ways to escalate the fees. We hope this lawsuit leads to significant changes," says Mitch Goldstone, President and CEO of 30 Minute Photos Etc. and, a national online boutique photo service.

"The U.S. credit card system is seriously broken and mismanaged, and millions of merchants and consumers are unnecessarily paying for it through credit card interchange fees that are increasing at an alarming rate. This lawsuit will hopefully result in a much-needed major reform of the credit card industry," says Michael Schumann, co-owner of Traditions Classic Home Furnishings, which operates retail furniture stores in St. Paul and Minneapolis, MN and Naples, FL.

"Small merchants do not have any options available to them to fight this individually, but collectively, I am confident we can make a difference against big banks and credit card companies. These interchange fees definitely affect my bottom line, and I'm ready to stand up for a change," says Jonathan Mathias, owner of A Dash of Salt, L.L.C., a restaurant and catering business in Bridgeport, CT.

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