Suit could become part of class action (MarketWatch)
By Steve Gelsi, MarketWatch Last Update: 3:02 PM ET Sept. 26, 2005
NEW YORK (MarketWatch) -- Four major merchant associations said Monday that they have filed an antitrust lawsuit against Visa, MasterCard and banks that issues credit cards in a growing battle over fees.
The suit alleges that some banks and credit card companies are engaging in "collusive practices" by setting credit-card interchange fees at high levels. Interchange fees are the fees that banks charge retail businesses for credit card transactions.
Mitch Goldstone of 30 Minute Photos Etc., the lead plaintiff in an earlier class action suit against Visa, MasterCard and banks that issue the credit cards, said a suit filed Monday by the retailing groups will likley be combined with his case.
A court hearing has been scheduled for Thursday to combine the suits, he said.
The legal action could amount to the "largest antitrust litigation since AT&T in the early 1980s," Goldstone told MarketWatch.
Goldstone said he expects to keep his position as lead plaintiff in the combined suit, which will be argued by law firm Robins, Kaplan, Miller and Ciresi.
The action Monday was taken by the National Association of Chain Drug Stores, the National Association of Convenience Stores, the National Community Pharmacists Association, and the National Cooperative Grocers Association.
The companies named in the lawsuit include Visa, MasterCard, Bank of America (BAC: news, chart, profile) , Citibank (C: news, chart, profile) , Bank One, Chase Manhattan Bank, J.P. Morgan (JPM: news, chart, profile) , Chase Fleet Bank, and Capital One (COF: news, chart, profile) .
The plaintiffs said they would seek damages and injunctive relief to stop the alleged anticompetitive practices.
A spokesperson for MasterCard could not be reached for comment.
However interchange fees topped the "risks" section of MasterCard's recent initial public offering prospectus filed with regulators on Sept. 15.
"We are devoting substantial management and financial resources to the defense of interchange fees...," MasterCard said in its IPO document. "If (credit card) issuers cannot collect or are forced to reduce interchange fees, they may be unable to recoup a portion of the costs incurred for their services.
"This could reduce the number of financial institutions willing to participate in a four-party payment card system, lower overall transaction volumes, and/or make proprietary end-to-end networks or other forms of payment more attractive.
"Issuers could also charge higher fees to consumers, thereby making our card programs less desirable and reducing our transaction volumes and profitability, or attempt to decrease the expense of their card programs by seeking a reduction in the fees that we charge.
"If we are less successful than Visa in defending interchange fees, we could also be competitively disadvantaged against Visa. If we are ultimately unsuccessful in our defense of interchange fees, such regulation may have a material adverse impact on our revenue, our prospects for future growth, and our overall business."
[Source: Steve Gelsi is a reporter for MarketWatch in New York]
