Visa, Mastercard, Major Banks Facing New Litigation Over ‚Anticompetitive‘ Fees

A San Diego pizzeria has filed a proposed class action against Visa, Mastercard and five major banks, alleging they conspired to keep merchant credit card fees high by restricting competition. The complaint seeks to represent U.S. businesses and other entities that accepted the networks’ cards from Jan. 25, 2019, onward; its claims have not been tested in court.

The 134-page complaint alleges that Visa and Mastercard coordinated with Bank of America, Capital One, Chase Bank, Citibank and Wells Fargo over decades to set schedules of interchange fees. These are charges merchants pay to card-issuing banks for transactions. The suit describes them as effectively non-negotiable and claims the defendants used connected network rules to prevent merchants from avoiding higher-cost cards.

According to the lawsuit, merchants that accept one Visa or Mastercard credit card must accept all cards issued on that network, regardless of the fees attached. The complaint also alleges that restrictions have limited merchants’ ability to steer customers toward cheaper payment methods, including by applying surcharges to particular cards. It claims these practices weakened incentives for banks and payment networks to compete on price.

The lawsuit also challenges fees charged by Visa and Mastercard for operating their payment networks, which it says are separate from interchange fees. The complaint alleges those charges add to merchants’ costs. It states that merchants now pay more than $100 billion annually in fees to accept Visa and Mastercard credit cards. That figure is the lawsuit’s claim; the report does not specify a calculation method or comparison baseline.

Why Merchants Seek a New Remedy

If the allegations are substantiated, the case could affect the costs businesses pay to accept credit cards and the rules governing how they offer payment choices to customers. Merchants may factor transaction costs into prices, but the complaint does not quantify any effect on consumer prices or show that consumers would benefit directly from a change.

The proposed case also targets fees charged after the period covered by an earlier monetary settlement. Its outcome could determine whether merchants have another route to seek compensation for later transactions, though filing the suit does not establish that the defendants acted unlawfully or that the proposed class will be certified.

Earlier Settlement Left Later Fees at Issue

The complaint points to a separate, long-running antitrust case involving card fees. A court approved a monetary settlement in December 2019 that provided more than $5 billion in relief to merchants, according to the source report. That settlement covered a class period ending Jan. 24, 2019, the new complaint says.

A separate settlement seeking changes to the networks’ rules had been preliminarily approved, according to the report. The new lawsuit argues that this prospective relief would not compensate merchants for fees paid after Jan. 24, 2019. It seeks to cover merchants that accepted Visa- or Mastercard-branded credit cards beginning the next day and continuing until the alleged anticompetitive effects cease.

„“a deadweight toll on virtually every credit card purchase in America”“

— The complaint

Claims and Class Status Remain Open

The allegations remain unproven, and the source report does not provide responses from Visa, Mastercard or the five banks. It is not clear from the supplied material whether any defendant has answered the complaint, whether the court has ruled on it, or whether the proposed class will be certified.

The filing’s estimates of merchant costs and its claims about the effects of network rules have not been independently established in the material provided. The complaint also asks for coverage lasting until the alleged effects cease, but the report does not describe how that endpoint would be determined.

Court Review Will Set the Next Steps

The case must proceed through court before the claims can be resolved. The plaintiff will need to pursue the lawsuit, and the court may consider issues including the defendants’ responses and whether the proposed group of merchants can be certified as a class. The source report does not identify a hearing date or a schedule for those decisions.

Any outcome could take time and may not provide the relief sought. Until the court rules, the fee-setting and competition claims should be treated as allegations, and no compensation or rule change is established by the filing itself.

Key Questions

Who is being sued?

The proposed class action names Visa, Mastercard, Bank of America, Capital One, Chase Bank, Citibank and Wells Fargo as defendants.

What does the lawsuit allege?

It alleges the networks and banks used fee schedules and network rules to limit competition, maintain merchant transaction fees and restrict merchants’ ability to steer customers to lower-cost payment options. Those claims have not been proven.

Which merchants could be included?

The proposed class covers individuals, businesses and other entities in the United States that accepted Visa-branded or Mastercard-branded credit cards from Jan. 25, 2019, until the alleged anticompetitive effects end. The court has not certified the class, based on the supplied report.

How does this relate to the earlier settlement?

The complaint says a monetary settlement approved in December 2019 covered transactions only through Jan. 24, 2019. This new filing seeks a remedy for alleged conduct affecting merchants after that date.

Have the defendants or the court responded?

The supplied report does not include responses from the defendants or any ruling on the new complaint. The allegations remain unresolved.

Source: hn