Another huge group of retail chains—including 7-Eleven, Amazon, Barnes & Noble, Costco, Dick's Sporting Goods, FootLocker, Gap, IKEA, Lowe's, Michael's and REI—sued a somewhat smaller group of MasterCard and Visa banks on Wednesday (June 26), saying of Visa/MasterCard that "these cartels' twin conspiracies" have cost retailers hundreds of billions of dollars in excessive interchange fees.
This is the latest—but no means last—retailer lawsuit opposing the $7.25 billion interchange settlement that's reaching its final stages this summer.
The 94-page federal restraint of trade complaint repeated now-familiar accusations of violations of the Sherman and Clayton Acts. "Even if these restraints have any competitive benefit, their anticompetitive effects—massive overcharges to merchants and maintenance of substantial market power—vastly outweigh any such benefit. Within each conspiracy, Issuers charge merchants exactly the same inflated prices that are the products of the banks' collusion," the federal filing said. "These banks typically compete vigorously for cardholders, but they do not compete for merchant acceptance or for the Interchange Fees that merchants pay to accept their Visa and MasterCard cards."
The filing tried to address arguments that the card brands agreed to a fixed price to protect retailers from what might be unlimited charges from unscrupulous banks.
"Visa and MasterCard have argued that default Interchange Fees are justified because, as a result of their Honor All Issuers rules, an individual Issuer could otherwise potentially 'hold up' merchants that accept Visa's and MasterCard's General Purpose Payment Cards by charging as high an Interchange Fee as that Issuer wishes. This 'hold-up' problem is the result of the banks' anticompetitive agreements not to compete for merchant acceptance, i.e., the Honor All Issuers rules," the lawsuit said. "Attempting to justify Interchange Fee price fixing on the grounds that it addresses the problems of an agreement not to compete, as Defendants have sought to, is perverse. Price fixing in tandem with an agreement not to compete is not a justification for anticompetitive conduct. It is anticompetitive conduct."
U.S. District Judge John Gleeson, who is overseeing the interchange settlement, has scheduled a Sept. 12 hearing on the fairness of the settlement, after which he'll have to give it final approval or not.
- See this Bloomberg story
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