Visa Inc. and MasterCard Inc., the world’s largest payment networks, have been sued by a trade group representing operators of automated teller machines over claims that the companies fix prices and suppress competition among ATM networks. The trade group, in the lawsuit filed last month in federal court in Washington, accused Visa and MasterCard of antitrust violations for restricting independent ATM operators from charging varying prices for customers using alternative networks such as STAR, Shazam Inc. or TransFund. Under a uniform agreement, the operators can’t charge less for transactions over a network that competes with Visa and MasterCard, according to the Complaint.
New Federal Reserve rules have reduced the fees charged to merchants for debit-card purchases. Visa and MasterCard processed cash transactions totaling at least $547 billion in the United States last year, including withdrawals from ATMs, according to company filings. It was alleged in the Complaint:
The ATM restraints prevent ATM operators from offering their customers a discount or benefit for completing a transaction over a network that is less costly to the ATM operator. Consumers cannot be rewarded for using a lower cost and more efficient network.
The allegations were made by the National ATM Council Inc., a trade group based in Jacksonville, Florida, and 13 operators of ATMs in nine states. The Plaintiffs, who are asking to represent the 350 non-bank ATM operators nationwide, are seeking triple damages. The ATM operators claim that the “overwhelming” majority of so-called PIN debit cards used for ATM transactions are branded by Visa or MasterCard. In order to accept one of these cards, an ATM operator must have access to the Visa and MasterCard networks. Independent or non-bank operators must be sponsored by a financial institution that is a member of the Visa and MasterCard networks.
Visa, MasterCard and their member banks require the service fee for any transaction at an ATM to be “no less than the amount charged at that ATM or terminal for a Visa or MasterCard transaction,” even for transactions that don’t use the companies’ networks, the Complaint alleges. Plaintiffs contend:
By restricting their ability to attract customers to lower cost ATM services through lower prices, the ATM restraints put a competitive straightjacket on ATM operators.
It will be interesting to see how this lawsuit winds up and how it affects, not only the actual parties, but also consumers. We will watch for the outcome with great interest.
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