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NEW YORK -- A coalition of retailers has filed an antitrust class-action lawsuit against Visa, MasterCard, Bank of America, Citibank, Bank One, Chase Manhattan Bank, JPMorgan Chase, Fleet Bank, Capital One and other major banks, alleging that the companies colluded to charge supra-competitive, exorbitant and fixed interchange fees for the acceptance of these credit-card payments.
The ultimate goal of the lawsuit is to give retailers a voice in setting the correct competitive levels for interchange fees, K. Craig Wildfang, a partner at Robins, Kaplan, Miller & Ciresi LLP, who represents the plaintiffs, told Convenience Store News. "No single merchant, even Wal-Mart, would be able to change the system. That's why merchants are best served by a class-action lawsuit," Wildfang said.
CHS Inc., which is based in St. Paul, Minn., and has more than 800 Cenex-branded convenience stores, is one of five retailer plaintiffs. The others are Photos Etc. Corp., doing business as 30 Minute Photos Etc., of Irvine, Calif.; Traditions Classic Home Furnishings of St. Paul, Minn.; A Dash Of Salt LLC of Bridgeport, Conn.; and KSARRA LLC of Newtown, Conn.
"Merchants have little or no ability to negotiate with Visa and MasterCard for lower interchange fees, and these fees are a 'hidden tax' that raise prices paid by consumers for almost every product they buy," Wildfang said in a statement. "Visa and MasterCard have previously been found to have 'market power' in the relevant markets, so Visa, MasterCard and the banks now have the burden of proving that they have set the interchange fees at the correct competitive level. Even Visa's own economists admit that they cannot satisfy this burden.
"Due to Visa and MasterCard's market power, the United States has the highest credit-card interchange fees among industrialized countries. Regulatory authorities in many other countries, from the European Union to Australia, have recently adopted measures to reduce interchange fees, but in the United States, it will take action by the courts to accomplish this."
Wildfang told CSNews that he has already received several calls from retailers interested in joining the suit and ultimately expects that more will do so.
An Ongoing Saga
High credit-card fees have always been a hot topic among retailers, but the discourse heated up after April 1, when Visa and MasterCard imposed a series of significant increases, some as high as 2.9 percent, particularly for new premium cards. In addition to increasing rates, Visa and MasterCard began urging consumers to move to the higher-rate premium cards and away from lower-rate standard cards, according to the National Retail Federation.
In May, the Federal Reserve Bank of Kansas City held a conference on credit and debit card interchange fees, saying the rapidly escalating fees amount to a hidden tax on U.S. consumers.
"The fees that the credit card companies charge defy logic and they are using them to increase profits far more than to provide any meaningful benefits to retailers," Teri Richman, NACS senior vice president for public affairs and research, said at that time. "Credit card company rules effectively prohibit retailers from providing discounts for cash or checks in all but a handful of situations. As a result, consumers pay more even when they don't use their cards. It's time for this constant picking of consumers' pockets to come to an end."
For more on the ways high interchange fees affect convenience retailers and petroleum marketers, see Cost of Credit, a CSNews exclusive report.