Another Interchange Suit Seeks Sweeping Reform of Fee-Setting Mechanism

The legal battle over the bank card associations' interchange pricing arrangements, already red-hot, got even hotter today when four retail trade associations slapped Visa U.S.A., MasterCard International, and several major banks with a class-action antitrust suit. The suit, filed in the U.S. District Court for the Eastern District of New York by the National Association of Convenience Stores, the National Association of Chain Drug Stores, the National Community Pharmacists Association, and the National Cooperative Grocers Association, is the third major case against the bank card networks over interchange since June. As in the other cases, the plaintiffs allege the banks and their networks set interchange prices?the fees merchants pay acquirers as part of their discount rates for card acceptance?collusively and at “supracompetitive” levels. And, as in at least one earlier case, this one seeks far-reaching reform of the interchange pricing mechanism. Although the latest suit seeks unspecified damages and injunctive relief, the plaintiffs say they won't be satisfied with “temporary” relief. “We are looking for long-term reform of the credit card interchange system,” John Rector, general counsel of the community-pharmacists group, said in a statement. “We ultimately seek a competitive and fair interchange fee system.” In this way, the suit resembles one filed in June on behalf of a class of small merchants, about which one of the lead attorneys said the merchants' object was sweeping reform of the way interchange pricing is set (Digital Transactions News, June 29). The attorney is with Robins, Kaplan, Miller & Ceresi LLP, the Minneapolis firm that also filed the suit today on behalf of the four trade groups. Two other suits brought by Kroger Co. and other grocery and pharmacy chains were filed against Visa and MasterCard separately this summer (Digital Transactions News, July 15). Both MasterCard and Visa issued statements dismissing the merits of the latest litigation. Visa's statement supported interchange as a “fair” means to allocate the costs of card-transaction processing. Other named plaintiffs include Bank of America Corp., Citibank (part of Citigroup Inc.), Bank One, Chase Manhattan Bank, JPMorgan Chase & Co., Chase Bank (part of JP Morgan Chase, along with Bank One and Chase Manhattan), Fleet Bank (part of BofA), and Capital One Corp. The four trade groups represent “hundreds of thousands” of retail outlets across the country accepting Visa and MasterCard, according to the statement released by the four groups.