Visa, Mastercard, Major Banks Facing New Litigation Over ‘Anticompetitive’ Merchant Credit Card Transaction Fees

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A San Diego pizzeria alleges in a proposed class action lawsuit that Visa, Mastercard and several of the nation’s largest banks have maintained a conspiracy to artificially inflate the fees merchants pay on credit card transactions, despite a more than $5 billion class action settlement in recent years over the same allegedly anticompetitive market restraints. 

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The 134-page lawsuit contends that the effectively non-negotiable credit card transaction fees imposed by the defendants amount to “a deadweight toll on virtually every credit card purchase in America,” totaling hundreds of billions in “monopoly rents” at rates that “no competitive market would produce.” 

According to the complaint, Visa and Mastercard have worked with the bank defendants—Bank of America, Capital One, Chase Bank, Citibank and Wells Fargo—for decades to set uniform schedules of interchange fees, i.e., the effectively non-negotiable charges merchants must pay to credit card-issuing banks on each transaction. The case charges that the defendants, to maintain the high interchange fees and “ensure merchants cannot escape them,” have implemented a “web of anticompetitive rules,” or restraints, that on the whole have disabled any market forces that could rein in or otherwise discipline the credit card transaction costs imposed on merchants. 

Broadly, the interlocking restraints set and maintained by the defendants have forced merchants that accept any Visa and Mastercard credit card to accept all such cards, regardless of cost, thereby eliminating any incentive for issuing banks to compete by lowering their fees, the suit says. The lawsuit claims the challenged restraints have also prevented merchants from being able to steer customers to lower-cost payment options—for instance, by surcharging based on a customer’s use of a particular card. These and other restraints have prevented competition among issuing banks and other credit card networks, allowing the financial giants to raise their fees every year “without consequence,” the case alleges. 

“The scale of this ongoing scheme is staggering: merchants now pay over $100 billion annually in fees to accept Visa and Mastercard credit cards, enriching Defendants at merchants’ expense,” the class action lawsuit states. 

The filing claims Visa and Mastercard have also exploited the allegedly anticompetitive market handcuffs to artificially inflate their own network fees—comprised of per-transaction fees and fixed fees—charged to merchants as a cost of accepting the companies’ credit cards, adding “an additional supracompetitive tax on each credit card transaction.” 

The suit states that in December 2019, the court approved a class action settlement in years-old multidistrict litigation that provided upward of $5 billion in monetary relief to merchants, but only for a “class period” ending on January 24, 2019. Although a separate “equitable relief” class action settlement seeking injunctive relief has been preliminarily approved, the benefits will apply only prospectively and merchants will not receive “a single dollar in compensation ... for the fees they have paid since January 25, 2019.” 

According to the complaint, while some merchants obtained relief for pre-2019 transactions and some may benefit from rule changes in the future, merchants that accepted Visa and Mastercard credit cards after January 2019 have “borne the full brunt of Defendants’ continuing anticompetitive conduct.” 

“This settlement structure leaves millions of American merchants without any remedy for their ongoing injuries,” the lawsuit attests. 

The interchange fees class action lawsuit looks to represent all individuals, businesses and other entities that have accepted Visa-branded and/or Mastercard-branded credit cards in the United States from January 25, 2019 until the alleged “anticompetitive effects” of the defendants’ conduct cease. 

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