CVS and other merchants seek to continue antitrust suit against Visa and Mastercard

Posted on: June 10th, 2014 by Steve Larson
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visa_masterCVS Pharmacy Inc. and scores of other merchants opting out of last year’s historic $7.25 billion antitrust settlement with Visa Inc. and Master Card Inc. urged a New York federal judge to keep alive their suit against the credit card giants for allegedly plotting to fix credit card swipe fees.  The group of more than 30 retailers, known collectively as the CVS plaintiffs, told the court that the motion to toss the suit from Visa and MasterCard was riddled with problems and that the merchants have pled sufficient facts to allege a conspiracy between the card companies and their member banks to allow the case to proceed.

Among the arguments for dismissal faulted by the opt-out merchants were assertions that they were barred from pursuing relief under a settlement agreement in an older case known as Visa Check. The merchants held that that agreement applies only to alleged price-fixing carried out prior to 2004 and that they are therefore free to pursue new claims, a position they say has been backed by several courts.

“Under defendants’ interpretation they could never be sued again for any anti-competitive conduct because by definition anything they could ever do — such as a scheme to divide markets or restrict output — would necessarily relate in some way to their pre-2004 conduct,” the plaintiffs said. “As this court previously observed, under defendants’ reading of the release, they would be absolved of all future wrongdoing unless they first exited the payment card business entirely.”

The merchants also bashed the assertion from Visa and MasterCard that they lack standing to bring an antitrust suit because they do not directly pay interchange fees to issuing banks and are therefore indirect purchasers barred from antitrust relief under the landmark Illinois Brick Co. v. Illinois case.

CVS and the others said that they have in fact alleged that they directly pay the allegedly anti-competitive fees and that they still have standing even in instances where that is not the case.

“Even if defendants are right and the plaintiffs do not directly pay the interchange fees to the issuing banks, plaintiffs nevertheless have standing to sue,” they said. “This is because the acquiring banks are co-conspirators who impose the interchange fee on the merchant plaintiffs.”

Visa and MasterCard are facing allegations from CVS, , Hewlett-Packard Co., Toys R Us Inc., Bed Bath & Beyond Inc. and several others that they colluded with banks to manipulate the fees they charged retailers who take their credit cards. The defendants also imposed illegal prohibitions on the merchants that ensured the card companies would not compete against each other for customers, the merchants have claimed.

The allegations closely mirror those in an antitrust case that Visa and MasterCard resolved in mid-December through a controversial agreement with a class of 12 million retailers, believed to be the largest antitrust settlement ever at $7.25 billion.

A New York federal judge signed off on that pact even though it was denounced by a coalition of some of the nation’s largest retailers, including several of the CVS plaintiffs, who said the accord failed to address the credit card companies’ dominant grip on the industry and allowed them to continue raking in billions in hidden fees.

The case is In re: Payment Card Interchange Fee and Merchant Discount Antitrust Litigation – Opt Out Cases, case number 1:14-md-01720, in the U.S. District Court for the Eastern District of New York.