An ATM trade group filed an antitrust lawsuit against Visa and MasterCard in federal district court for the District of Columbia on October 12, 2011. In the lawsuit, National ATM Council, et al., v. Visa Inc., et al., No. 11-civ-1803-ABJ, plaintiffs allege that Visa and MasterCard unlawfully fix the price of network transaction fees. Plaintiffs seek class action status on behalf of 350 ATM operators nationwide. Similar lawsuits followed soon after. See Bartron v. Visa Inc., et al., No. 1:11-cv-01831-ABJ (D.D.C.), Genese v. Visa, Inc. et al., No. 1:11-cv-01838-ABJ (D.D.C.) (also naming Bank of America, JPMorgan Chase, and Wells Fargo); and Stoumbos v. Visa Inc., et al., No. 1:11-cv-01882-ABJ (D.D.C).
Visa and MasterCard have been besieged by successive antitrust litigation and regulatory challenges, notably including the DOJ’s lawsuit to end their exclusivity rules and Wal-Mart’s attack on Visa’s honor-all-cards rule as applied to debit cards. Most recently, the Durbin Amendment to the Dodd-Frank Act caps debit interchange fees and prohibits debit network exclusivity. 12 CFR 235 et seq.
Plaintiffs in this latest round claim that Visa and MasterCard unlawfully fix the fees that ATM operators can charge for transactions processed over third-party networks. The majority of PIN debit cards used for ATM transactions are branded Visa or MasterCard. In order to accept these cards, an ATM operator must have access to the Visa and MasterCard networks. Independent or non-bank ATM operators must be sponsored by a financial institution that is a member of the Visa and MasterCard networks. Plaintiffs allege that Visa and MasterCard mandatory policies permit non-bank ATM operators to charge consumers an access fee for ATM transactions, but only if the fee is no less than the amount charged at that ATM or terminal for a Visa or MasterCard transaction. Plaintiffs complain that these rules apply even for transactions that do not use the Visa or MasterCard networks. Therefore, they contend, the rules force independent ATM operators to charge consumers the same fee for all ATM transactions, even if their cards can access smaller networks that might charge a lower network processing fee.
Plaintiffs contend that roughly half of the 400,000 ATMs nationwide are independently operated. They claim that the Visa and MasterCard rules impede competition for ATM services, cause increased ATM fees, and restrict deployment of ATMs. Plaintiffs seek injunctive relief and treble damages.
It remains to be seen, of course, whether the latest lawsuits sufficiently state a claim, especially under the heightened pleading standard set forth in the United States Supreme Court’s Twombly decision. (The Supreme Court also made “class certification” more difficult in the recent Dukes decision, but we limit our focus here to sufficiency of claims.) At first glance, the plaintiff ATM operators face some significant challenges. First, the Visa and MasterCard directives actually state that ATM operators may not charge an access fee for transactions on the Visa or MasterCard network that is greater than the access fee charged for transactions on any other network accepted at that terminal. Plaintiffs complain that rules against higher fees do not permit them to be profit-maximizing, but it is difficult to see how rules against higher fees are injurious to competition, as plaintiffs allege.
Second, although plaintiffs allege that the relevant product market is “the market for ATM services,” the reality is that independent ATM operators mostly deploy ATMs at non-bank facilities, such as airports, hotels, convenience stores, etc. Analysis of the competitive effects of the rules seemingly would need to focus on that market segment. Third, plaintiffs will need to demonstrate why Visa, MasterCard, and their member banks are not entitled to establish pricing for use of the Visa and MasterCard networks. The antitrust laws are designed to promote competition, not protect market participants from competition. An alternative, pro-competitive solution for non-bank ATM operators would be to associate with, or build, alternative payment networks. Last, plaintiffs fail to plead an express agreement between Visa and MasterCard to fix prices, and little (apart from the Visa and MasterCard rules themselves) to suggest that an implied agreement exists. We will watch developments in this litigation and provide updates if it proceeds.