Court Throws Out One Interchange Case

SAN FRANCISCO – A Federal District Court has thrown out, with prejudice, merchant complaints that Visa and MasterCard’s interchange rates are anti-competitive, ruling that the merchant plaintiffs have no case under federal anti-trust laws. The merchants brought their case in the District Court for the Northern District of California in early October 2004. “Visa is pleased with the Court’s decision to dismiss, with prejudice, the merchant interchange class action (Sheri Kendall et al vs. Visa USA) filed against Visa and three of our Member financial institutions,” said Josh Floum, general counsel for the card brand. “Today’s ruling is particularly encouraging as the Court accepted Visa’s argument that merchants have not been harmed and do not have legal standing to sue the Association, as they are indirect purchasers of our services. Further, the Court found the merchants have no standing to bring a price fixing claim in this case,” he added. MasterCard’s general counsel, Noah Hanff, himself a veteran of several of these cases, was also pleased. “This is the first recent decision to address the challenge to POS interchange fees in the United States,” Hanff noted. “The strength of the decision, coupled with its conclusiveness, represents a key win for MasterCard and our customers. We are pleased that Judge White applied existing antitrust precedent and dismissed plaintiffs’ claims that the setting of interchange rates and the merchant discount rates somehow violate the U.S. antitrust laws. “We have always maintained that interchange fees are efficient, pro-competitive and essential to the operation of a four-party system. Judge White’s decision should send a strong message to class action plaintiffs’ lawyers who have recently sought to bring similar claims against MasterCard and our members,” he added. Hanff found it that the Judge, Jeffery White, dismissed this case based on the arguments MasterCard and other defendants made in motions to dismiss, the earliest stage in which a case can be dismissed. Judge White relied on antitrust precedent which bars antitrust recovery for indirect purchasers, Hanff explained. Since the merchants’ theory in the complaint was based on the claim that MasterCard set interchange fees to acquirers who pass along such fees to merchants in the merchant discount rates, the Court found that the merchants, as indirect purchasers, lacked antitrust standing to assert such claims. Visa added that it was particularly cheered by the ruling because other interchange cases have been filed on substantially similar grounds and could be considered thus weakened. -