December 5, 2008 Department of Justice Investigating Interchange Antitrust Violations The Antitrust Division of the U.S. Department of Justice (DOJ) is probing whether certain Visa and MasterCard interchange policies violate the Sherman Act, according to third quarter finan- cial statements filed recently by the credit card companies. Visa’s 10-K statement disclosed that on October 10, 2008, the DOJ requested information about “VISA U.S.A.s policies regarding merchant surcharging and merchants’ ability to steer custom- ers to other forms of payment.” This was part of a Civil Investigative Demand regarding a poten- tial violation of the antitrust laws, according to Visa. MasterCard reported in a 10-Q filing that DOJ requested similar information on October 14 — “particularly with respect to merchants’ ability to steer customers to payment forms preferred by merchants.” The DOJ also sent American Express and Discover queries about their no- surcharging and anti-steering policies. At issue are credit card company rules that prohibit retailers from surcharging customers who pay with credit cards in order to cover the high transaction costs, especially interchange fees. Federal law requires credit card companies to allow merchants to offer lower prices for products bought with cash. Some U.S. merchants have tried to offer cash discounts, only to be frustrated by highly restrictive card company rules governing the way they can offer customers these savings. The nuances of card company rules make the cash-discount option tedious, impractical and, in most cases, cost-prohibitive. For example, retailers must post the cash price second and label it a discount from the non-cash price. Some operating rules prohibit discounts for payments other than cash — even when using a PIN debit card, which withdraws funds directly from a cus- tomer’s bank account and carries the lowest interchange fee. FMI is trying to help members navigate these restrictions with a new best practices guide, “Cash Costs Less: Offering Customers a Discount for Cash Payments at the Point of Sale.” To obtain a copy, contact Jennifer Hatcher at 202.220.0734 or email@example.com. Whether the DOJ investigations will lead to antitrust lawsuits is unknown, but the agency has a long history of taking legal action to curb anti-competitive credit card company practices. Numerous Countries Probing Credit Card Interchange Fee Issues Visa’s 10-K statement listed 19 countries in which central banks and regulatory authorities are investigating interchange fee issues and acting to resolve them: Australia Hungary Portugal Sweden Brazil Mexico Romania Switzerland Colombia New Zealand Singapore United Kingdom Germany Norway South Africa Venezuela Honduras Poland Spain The company also cited the current investigation by the European Commission. A link to Visa’s 10-K filing is posted at http://investor.visa.com/phoenix.zhtml?c=215693&p=irol-sec. FOR MORE INFORMATION: About media coverage, contact Bill Greer at 202.220.0667 or firstname.lastname@example.org. About legislative action, contact Jennifer Hatcher at 202.220.0734 or email@example.com. Visit www.fmi.org/interchange/ for the latest news about FMI’s campaign for cost-based and transparent interchange fees.
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