A law firm representing a group of small businesses on Thursday said it has filed a class-action lawsuit against the nation’s biggest banks charging them with illegally fixing prices of credit card transaction fees.
The lawsuit, filed in the U.S. District Court for the District of Connecticut, charges Visa, MasterCard, Bank of America, Citigroup’s Citibank, JPMorgan Chase, and other leading banks with setting card interchange fees at “supra-competitive levels,” which banks charge merchants every time a customer makes a purchase using a MasterCard or Visa card.
The Minneapolis office of Robins Kaplan Miller & Ciresi filed the suit on behalf of the following businesses: Photos Etc. Corp., which does business as 30 Minute Photos Etc., of Irvine, Calif.; Traditions Classic Home Furnishings of St. Paul, Minn.; CHS Inc. of St. Paul, Minn.; A Dash Of Salt, L.L.C. of Bridgeport, Conn.; and KSARRA, L.L.C. of Newtown, Conn.
Many businesses have argued that banks, acting with Visa and MasterCard, are illegally fixing prices on interchange fees. Wal-Mart Stores, the world’s largest retailer, negotiated a multibillion dollar settlement with Visa and MasterCard in 2003.
Visa reportedly said it would vigorously defend its use of interchange fees, which it called “a practice that has been successful in the marketplace as well as upheld as legal and necessary in federal court,” according to a statement from Josh Floum, executive vice president and general counsel. “We believe the merchants in this suit are seeking to shift their normal costs of doing business onto someone else, the consumer.”
The law firm bringing the suit said interchange fees represent a hidden tax that raise prices on most products people buy.
“Merchants have little or no ability to negotiate with Visa and MasterCard for lower interchange fees,” K. Craig Wildfang, a partner at the law firm, 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.”
Wildfang added, “Class action litigation is the only alternative that offers merchants any prospect for relief from high, and rising, interchange fees. The card issuing banks that control Visa and MasterCard have the ability to set the interchange fees as high as they want, without any market force to restrain them.”