Digital Transactions Authoritative, insightful and timely information for payments professionals
By Jim Daly
In the opinion of Visa Inc.’s lawyers, the Pulse PIN-debit network’s antitrust suit against the leading payment card network shouldn’t even have a pulse because Pulse hasn’t shown it has been harmed. Meanwhile, Google Inc. and a number of merchants that individually sued Visa and MasterCard Inc. after opting out of their share of damages from a merchant class action against the card networks and some banks over credit card interchange have settled their cases.
Visa in late January filed its response to the antitrust lawsuit Houston-based Pulse, a subsidiary of Discover Financial Services, filed against Visa in November. Pulse called Visa a “long-time monopolist” and accused the company of violating the federal Sherman Act and Texas law. In addition to treble damages, Pulse wants the U.S. District Court in Houston to put a freeze on Visa’s Fixed Acquirer Network Fee (FANF) price structure and its PIN-Authenticated Visa Debit (PAVD) program. Visa instituted both of those programs after the Federal Reserve Board’s debit card regulations implementing the Dodd-Frank Act’s Durbin Amendment took effect in 2011. The transaction-routing provisions of the Fed’s rule caused the Visa-owned Interlink PIN-debit network to lose more than half its volume.
Pulse claimed FANF and PAVD divert transactions from smaller debit networks such as itself and enable Visa to earn higher profits. But in its reply, Visa said “Pulse attacks Visa for doing the very things the antitrust laws aim to foster: reducing prices and increasing customer choice.” FANF reportedly rewards acquirers for sending more volume Visa’s way, and PAVD gives Visa customers the ability to route PIN-debit transactions on Visa’s network in addition to signature-debit ones.
Visa characterizes Pulse as asserting that it suffered harm from Visa’s lower transaction pricing, but also that Visa began charging higher overall prices to merchants and card issuers. Absent predatory pricing, which Visa says Pulse doesn’t allege, Pulse has no standing to claim that it suffered harm in the eyes of antitrust law by Visa’s lower transaction prices, according to Visa.
Regarding its allegedly higher overall pricing and PAVD, Visa says a competitor such as Pulse has no standing to complain about another network’s higher prices because “it [Pulse] does not pay those prices and stands to benefit from higher prices. Likewise, Pulse cannot complain about Visa’s offering merchants more choices for routing debit transactions, because doing so increases competition and does not result in Pulse paying allegedly higher prices.”
Pulse has until March 6 to respond to Visa’s dismissal motion.
Meanwhile, Google, Ethan Allen, Tiffany & Co. and numerous other retailers settled with Visa and MasterCard Inc. last month and dropped their interchange-related lawsuits against the networks, the Law360 news service reported. Those plaintiffs and dozens of other merchants had opted out of the $5.7 billion settlement the networks and some big-bank defendants agreed to in July 2012, in part because acceptance reportedly could have prevented them from challenging interchange and network rules in the future. Instead, they filed individual lawsuits against the networks challenging interchange on antitrust grounds.
In its recently filed regulatory report for its first quarter of fiscal 2015 ended Dec. 31, Visa said it has reached settlements with merchants representing 21% of Visa sales volume generated by all opt-out merchants.
