Visa Check Master Money Antitrust Litigation by yfb10475

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									TT0307_Legal          3/2/07    5:25 PM     Page 22




                                    Visa Check/Master Money
   Legal



                                    Antitrust Litigation Settlement
                                    What it means to you
                                    By Barrie VanBrackle



                              n January 2 and 3, lead        with respect to the settlement               MasterCard’s lower transaction vol-


            O                 counsel for the United
                              States merchants in the
                              Visa Check/Master Money
                antitrust litigation announced two
                merchant advisories. The first one was
                                                             amount. Because the lawsuit has, in
                                                             some sense, defined the manner in
                                                             which the card associations do busi-
                                                             ness, it’s appropriate to provide a brief
                                                             recap of the 10-year legal battle.
                                                                                                          ume). The settlement followed the
                                                                                                          court’s designation of Wal-Mart and
                                                                                                          The Limited’s original lawsuit as a class
                                                                                                          action involving approximately 5 mil-
                                                                                                          lion merchants, denial of Visa and
                that merchants who wish to accept              In 1996, Wal-Mart and The Limited,         MasterCard’s motions for summary
                Visa and/or MasterCard credit cards are      on behalf of themselves and, as they         judgment, and denial of MasterCard’s
                not required also to accept Visa- and/or     then alleged, “a national class of retail-   motion for severance or a separate trial.
                MasterCard-branded debit cards (and          ers,” challenged the MasterCard and          In its settlement agreement, Visa
                vice versa). This merchant advisory          Visa requirement that if merchants           denied liability for all claims and
                also sets forth that, prior to the date of   accept Visa and MasterCard credit            entered into the settlement “to avoid
                the advisory, Visa/MasterCard member         cards, they also must accept Visa and        the further expense, inconvenience and
                banks were to have re-issued their more      MasterCard debit cards. The premise          burden of this protracted litigation, and
                than 250 million ATM/debit cards             under which the merchants sued was           the distraction and diversion of its per-
                with the word “debit” on the face of the     antitrust—they alleged that they could       sonnel and resources.” The settlement
                card so that a merchant could easily         not do business without accepting cred-      agreement set forth a manner in which
                distinguish Visa/MasterCard debit            it cards. The plaintiffs objected to Visa    Visa would pay $2.025 billion into a set-
                cards from Visa/MasterCard credit
                cards. The debit cards also have bank
                identification numbers (BINs) that are
                distinct from the BINs assigned to the
                                                                  It appears that, at long last,
                Visa/MasterCard credit cards. This was          more than 10 years and $3 billion
                to have occurred prior to January 1.
                  Counsel for the United States mer-               later, the lawsuit is settled.
                chants also announced that a proposed
                settlement had been reached in a dis-        and MasterCard’s tying credit card           tlement fund account (specifically, an
                pute among the class members suing           acceptance to debit card acceptance,         initial payment of $10 million on July 4,
                Visa and MasterCard. Basically, the          which they alleged forced them to pay        2003, a payment of $215 million on or
                United States government, which              “supra-competitive, exorbitant and           before December 22, 2003, and succes-
                entered an appearance in the lawsuit so      fixed prices for acceptance of this invol-   sive annual payments of $200 million
                it could make a claim against the settle-    untary payment system and raised the         on or before December 22 of each suc-
                ment fund, accepted a settlement of its      prices paid by all of their retail cus-      ceeding year thereafter, through and
                claim. The merchant advisory also sets       tomers.” They argued the arrangement         including December 22, 2012).
                forth the manner in which the United         limited their ability “to accept and           In addition, Visa also agreed to untie
                States’ claims will be paid. Objections      receive the forms of payment which           merchant acceptance of its debit and
                to the proposed settlement were to have      they deem cost effective and efficient       credit cards, and agreed there would be
                been made prior to February 1.               for themselves and their customers.”         a clear and conspicuous identifier to
                  The lawsuit at issue has been pend-          After seven years, more than 5 million     differentiate its credit and debit cards.
                ing for more than 10 years (so long          pages of document discovery and              Under the settlement agreement, Visa
                that New York Governor Eliot Spitzer         approximately 400 depositions taken          was to have required issuers to have 80
                was one of the plaintiffs’ attorneys         over 500 days, Visa and the plaintiffs       percent of outstanding debit cards in
                when Wal-Mart Stores Inc. and The            reached a settlement on June 4, 2003.        compliance by July 1, 2005, and 100
                Limited Inc. sued Visa USA Inc. on           (MasterCard and the plaintiffs reached       percent compliance by January 1, 2007.
                October 25, 1996). The case was set-         a settlement in April 2003 that provid-        On January 5, the court entered a
                tled in 2003, and it has taken since         ed for the same equitable relief but half    Report and Recommendation produced
                that time for all claims to be resolved      of the monetary obligation, due to           by the special master appointed in the


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         case. With the exception of a document         the same type of relief as was request-                    tions spend on defending lawsuits, the
         “filed in a vault,” this Report and            ed for the merchants in the                                more likely it is that those costs will be
         Recommendation is (as of January 29),          Visa/MasterCard litigation. His law-                       passed on to the merchants and con-
         the last document filed in the lawsuit.        suit ultimately was dismissed in                           sumers in some form or another. As
         (The court’s docket sheet itself consists      November 2006 (based on, among                             such, this could mean to those in this
         of 188 pages.) This final report recom-        other things, his lack of standing).                       industry continual shopping around
         mends payment of attorneys’ and con-           Requiring Visa and MasterCard (and                         for the best deals and decreased mer-
         sultants’ fees and costs (as the plaintiffs’   member banks) to spend dollars defend-                     chant loyalty, which certainly are not
         attorneys were awarded more than $220          ing lawsuits means they are diverting                      attractive circumstances. TT
         million in fees in December 2003). As          time and attention from their main
         the United States government has               business. Ultimately (and ironically),                      Barrie VanBrackle is with the law firm
         reached agreement on the amount and            the more time banks and card associa-                      Manatt, Phelps & Phillips, LLP.
         manner in which the settlement funds
         from the case will be disbursed to it
         (and the class merchants have received
         numerous directions to apply for settle-
         ment benefits), it appears that, at long
         last, more than 10 years and $3 billion
         later, the lawsuit is settled.
           The electronic transactions industry
         has been watching the Visa/MasterCard
         lawsuit, which is the first significant lit-
         igation against those card associations
         that alleges antitrust violations. In
         November 2004, American Express
         also sued Visa and MasterCard, along
         with their member banks, alleging
         antitrust violations—specifically, that
         those two card associations, along with
         their member banks, “implemented and
         enforced illegal exclusionary agree-
         ments requiring any U.S. bank that
         issues Visa or MasterCard general pur-
         pose cards to refuse to issue American
         Express and Discover Cards.” That case
         and other lawsuits attempting to jump
         on the antitrust bandwagon with
         respect to interchange fees charged by
         the card associations are still pending.
         (To date, there are 50 docket sheets in
         the American Express case).
           What does the final settlement and
         the disbursement of funds in the
         Visa/MasterCard lawsuit mean? Al-
         though I have heard derogatory com-
         ments made about lawyers chasing
         ambulances, there are plenty of plain-
         tiffs looking for their day in court—the
         sheer amount of the settlement dollars
         in the Visa/MasterCard lawsuit likely
         will spawn numerous lawsuits in which
         other plaintiffs want their piece of the            recruiter@first-american.net   www.first-american.net
         pie. My research uncovered (in addi-
         tion to the interchange cases) a lawsuit
         in which a Nebraska consumer sought


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