A new group of merchants, including Delta Airlines, Emerald Foods, Callaway Golf Sales, Duke Energy, Men's Warehouse, MGM Resorts and Travelocity, filed suit in federal court Aug. 13 claiming Visa and MasterCard are violating the Sherman Antitrust Act by operating under identical rules for card acceptance.
The rules, or "Competitive Restraints," as the merchants put it, "eliminate competition among their (Visa's and MasterCard's) member banks for merchant acceptance of credit cards and debit cards."
The competitive restraints, says the suit, filed in U.S. District Court for the Eastern District of Texas, "led merchants to pay excessive interchange fees. In this manner, Visa and MasterCard have unlawfully restrained competition in these markets."
The suit comes as a variety of retailers, led by Target and Amazon, have filed other antitrust claims against the two card networks, which control more than 80% of the U.S. market for credit and debit cards, as a hearing on a proposed settlement of an eight-year-old antitrust suit against Visa and MasterCard is approaching. Dozens of merchants, including many of the original plaintiffs in that case, are objecting to the landmark $7.2 billion settlement and have asked the judge to reject its terms.
But the new 138-page complaint includes dozens of new plaintiffs. More than 100 companies have signed on as plaintiffs, including Mary Kay, United Supermarkets, Orbitz, Air Canada, El Al Airlines, Air New Zealand, Red Roof Inns, Radio Shack, La Quinta Inns, Ricker Oil Co., Red Wing Shoe Co., Harris County Hospital, and the city of Houston.
Among the alleged competitive restraints cited in the new suit are the setting of "default" interchange fees, the Honor All Cards Rules, the All Outlets Rules, the No Discount Rules, and the No Surcharge Rules, all of which are included in both Visa's and MasterCard's bylaws. "These rules," claim the plaintiffs, "have precluded merchants from gaining the benefits of competition as to the terms for the acceptance of cards of particular issuing banks and have precluded card issuers from competing for merchant acceptance of their cards."
"As a consequence, the setting of 'default' interchange fees effectively fixes the price of acceptance at a supra-competitive level," says the suit. "Plaintiffs have paid significantly higher costs to accept Visa-branded and MasterCard-branded credit and debit cards than they would if the Member Banks issuing such cards competed for merchant acceptance."