Target (NYSE:TGT), Macy's (NYSE:M) and 15 other major retail chains sued Visa (NYSE:V) and MasterCard (NYSE:MA) on Thursday (May 23), bringing new antitrust claims just as the window is about to close for merchants who want to opt out of the interchange settlement.
The Target group is separate from a Walmart-(NYSE:WMT)led group of 19 chains that opted out en masse on Tuesday (May 21). That group is expected to file its own antitrust lawsuit on Friday (May 24) or Tuesday (May 28).
The Target suit, which was filed in U.S. District Court in Manhattan, says Visa and MasterCard have adopted identical rules and fee structures that have eliminated competition. The complaint specifically calls out Visa and MasterCard's joint setting of default interchange fees, along with the card brands' honor-all-cards rules, all-outlets rules, no-discount rules and no-surcharge rules. Those rules prevent competition between card-issuing banks and allow the card brands to charge interchange above what competition would allow, the lawsuit says.
Joining Target and Macy's as plaintiffs in the new lawsuit were TJX (NYSE:TJX), Kohl's (NYSE:KSS), Staples (NASDAQ:SPLS), JCPenney (NYSE:JCP), Office Depot (NYSE:ODP), L Brands (NYSE:LTD), OfficeMax (NYSE:OMX), Big Lots (NYSE:BIG), Abercrombie & Fitch (NYSE:ANF), Ascena Retail Group (NASDAQ:ASNA), Saks (NYSE:SKS), The Bon-Ton Stores (NASDAQ:BONT), Chico's (NYSE:CHS), Luxottica (NYSE:LUX) and American Signature Furniture.
A spokesperson for a group representing the card brands and banks said the Target lawsuit "was fully expected and just more theatrics to get more publicity in advance of the May 28 deadline" for opting out of the interchange settlement. Trish Wexler, a spokesperson for the Electronic Payments Coalition, told Dow Jones, "This just really shows the level of greed involved here—that $7.25 billion wasn't enough for these retailers, so they needed to sue for even more."
The $7.25 billion number is the amount of the interchange settlement, which would be split among an estimated 8 million merchants. That's an average of about $800 per merchant after class-action legal costs are subtracted.
In practice, the primary reason these merchants opted out of the settlement and filed their own lawsuit is probably to preserve the big club that antitrust court action can provide. The terms of the interchange settlement cut off that option for any merchants that don't opt out. An antitrust lawsuit against Visa and MasterCard worked out very well for Walmart when the case was settled in 2004; the retail giant got a decade's worth of concessions, including interchange rate cuts. That appears to be an option that Walmart's competitors want, too.
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