NEW YORK (Dow Jones)--Consumers could face extra charges at the cash register if merchants have their say in a long-standing battle with the largest credit-card companies.
Retailers for years have wanted the ability to tack on a fee when a customer swipes a credit card, but Visa Inc. (V) and MasterCard Inc. (MA) don't allow it. Ten states, including California, Colorado and New York, also have laws that prohibit so-called checkout fees.
The card companies, which argue surcharging harms consumers, could ease up on their rules against the practice if they settle several lawsuits brought by supermarkets, convenience stores and other retailers.
"Recent checks indicate that part of a potential settlement in the ongoing merchant litigation...could include rule changes allowing merchants to surcharge consumers on credit card transactions," Jason Kupferberg, an analyst with Jefferies Group, wrote in a research note this week.
A Visa spokeswoman did not respond to a request for comment this week. A MasterCard spokesman declined to comment on the research note or whether a settlement was likely.
Visa and MasterCard already allow merchants to offer discounts for paying with cash and check and expanded those rights under a settlement approved with the Justice Department in July.
But merchant groups argue surcharging, as opposed to discounting, could better help retailers defray the costs of accepting cards, which they say have driven up the prices consumers pay for their goods.
Surcharging is "a remarkably strong tool to kind of guide consumer behavior to lower-cost payment options," said Brian Dodge, senior vice president of communications and state affairs at the Retail Industry Leaders Association, a trade group that represents merchants.
Payments groups argue merchants don't want to pay their fair share for card acceptance, which they say generates increased sales for retailers.
"Retailers benefit (from) card acceptance," said Trish Wexler, a spokeswoman for the Electronic Payments Coalition, which represents Visa, MasterCard and several large banks. "They just don't want to pay for that. They want their customers to pay for that instead."
The possibility of merchant surcharging comes after Bank of America Corp. (BAC), Wells Fargo & Co. (WFC) and other big banks scrapped plans to charge their customers a monthly fee for debit-card use amid consumer backlash.
Retailers could potentially charge a fee on each transaction made with a credit card. In Australia, where merchants are allowed to surcharge, the average fee charged to customers is 1.9% on transactions made with a Visa credit card and 1.8% on MasterCard transactions, according to Kupferberg, citing data from research firm East & Partners.
Such a move could prompt consumers to avoid using cards, which would put a dent in the transaction volume that drives revenue for Visa and MasterCard.
"I would definitely use cash more frequently than I do now," said Richard Goldstein, 23, who uses a Visa credit card for most purchases to earn rewards from his bank. "If I have to pay more for using a credit card, it's not worth it."
The no-surcharge rules are one of several grievances that Kroger Co. (KR), Payless ShoeSource, Safeway Inc. (SWY) and other merchants have raised in more than 50 lawsuits filed since 2005. They also argue that Visa, MasterCard and several banks that issue their cards have violated antitrust laws by fixing the fees that merchants pay to accept cards at anti-competitive levels.
The companies deny the allegations.
In addition to Visa and MasterCard, the suits name Bank of America, J.P. Morgan Chase & Co. (JPM), Wells Fargo, Capital One Financial Corp. (COF), Citigroup Inc. (C) and other banks.
Merchants paid $48.06 billion in fees on purchases made with Visa and MasterCard credit and debit cards in 2010, up from $41.86 billion in 2006, according to the Nilson Report, a payments industry newsletter.
As part of last year's Dodd-Frank Act, the Federal Reserve Board cut by almost half the amount of fees large banks can charge retailers on debit-card purchases. Those fees, known as interchange, are set by Visa and MasterCard but collected by the banks that issue their cards as revenue.
Visa and MasterCard have allowed retailers to offer discounts to customers for using cash, a practice that some gas stations and restaurants have used for several years. The Dodd-Frank provision also allows merchants to set up to a $10 minimum purchase amount for credit-card transactions.
The Justice Department sued Visa, MasterCard and American Express Co. (AXP) in October 2010, accusing them of handcuffing merchants to restrictive rules in order to accept their cards.
Visa and MasterCard settled the case and agreed to allow retailers to offer discounts and other incentives for using different types of cards. For example, a merchant could offer a cheaper price on goods to customers who pay with basic credit cards instead of rewards cards, which typically cost more for retailers.
American Express is fighting the suit.
Kupferberg, the Jefferies analyst, said if surcharging is allowed, it is unlikely that merchants would widely adopt the practice.
"I think merchants would be concerned about alienating and...confusing their consumers," Kupferberg said in an interview.
The merchant lawsuits have been consolidated in U.S. District Court for the Eastern District of New York. A tentative trial date has been set for September 2012, though Kupferberg said a settlement is the more likely outcome.
http://online.wsj.com/article/BT-CO-20111118-709253.html
Saturday 26 November 2011
Tuesday 15 November 2011
What Buffett sees in DirecTV, Intel and Visa
I'll spare readers another Warren Buffett lovefest article. Yes, Buffett is a living legend, and yes he is arguably the best investor of all time. But this is nothing new, and there have already been more articles than I can count about the man and his methods over the years. Buffett has been elevated to something akin to a demigod in the minds of many value investors, and the art of "investing like Buffett" has been thoroughly beaten to death by the financial press.
With this as a caveat, I'll acknowledge that yes, I too like to keep tabs on what Buffett is buying and selling.
It is never a good idea to blindly ape the trades of another investor — even one with a track record like Buffett's. Due to the time lag in reporting with the SEC, an investor you follow may very well have sold the position you are copying by the time you buy it. And what makes sense in that investor's portfolio might make no sense at all in yours.
Still, given Buffett's penchant for long investment time horizons, he's a little easier to follow than most. And again, his track record over the years make him a man worth watching. Imagine my pleasure this afternoon when I saw Berkshire Hathaway's updated portfolio holdings for the third quarter of 2011. Three out of Buffett's five new additions were Sizemore Investment Letter recommendations ( see Covestor portfolio based on the SIL). Buffett initiated positions in SIL recommendations DirecTV DTV +0.64% , Intel INTC +0.04% , and Visa V -0.07% . His other two additions were pharmacy chain CVS CVS -0.49% and defense contractor General Dynamics GD -0.99% .
While I was not invited to Buffett and partner Charlie Munger's strategy sessions before these purchases were made (I'm sure my invitation was lost in the mail), I have a pretty good idea of what Buffett sees in DirecTV, Intel, and Visa. Each is a leader in its respective industry, and all three benefit from durable, long-term macro trends.
Let's start with DirecTV, the world's largest provider of paid satellite television. Given that TV-over-internet options like Netflix NFLX +0.07% and Hulu are increasingly crowding the turf of traditional paid TV — and given that the paid TV market in the United States is already saturated — Buffett's choice here might raise a few eyebrows. I can assume that Mr. Buffett's rationale was the same as my own: DirecTV is a direct play on rising living standards in the fast-growing markets of Latin America, where it already has 11.1 million subscribers (vs. 19.8 million in the United States). Latin American revenues were up 46 percent in the 3rd quarter, due primarily to subscriber growth. But even in the United States — where everyone already has paid TV service in one form or another — revenues were up 8 percent. Not bad, given the precarious financial situation of the average American. DirecTV is also very reasonably priced at just 10 times expected 2012 earnings .
Moving on to Intel, my only question to Buffett is "What took you so long?" Intel absolutely dominates the market for computer processor chips. But this very strength is what has caused investors to shun Intel. Everyone knows the PC is dead. Smart phones and the iPad killed it. And given that Intel is still quite weak in the mobile market, the company is resigned to be a slow-growth behemoth. Who wants to own a dinosaur like Intel? That story would seem to make sense at first.
The problem is that it's simply not true.
The PC is far from dead. Smart phones and tablet computers are growing at a much faster rate, of course. And the PC market does depend more heavily on the corporate and enterprise market, which is not in the best of shape in this economy. But tablets and smart phones do not replace a computer for most users. And in most emerging markets, PCs are still very much a growth industry. Intel's revenues and earnings are growing at 28 percent and 17 percent year over year, respectively. And that is in near recessionary conditions. Meanwhile, the stock trades at just 9 times expected 2012 earnings and yields 3.4% as of 11/14. At current prices, I consider Intel a safer investment than most AAA-rated bonds.
Finally, we come to Visa. Visa and rival MasterCard MA +0.05% — also a Berkshire holding — have become somewhat trendy of late, but it wasn't like that for most of the year. Regulatory uncertainty cast a pall over credit card stocks, as did fears of a consumer slowdown. Yet investors who were, in Buffett's words, greedy when others were fearful did quite well in Visa and MasterCard. Both are among the best-performing stocks so far in 2011 .
Visa and MasterCard benefit from two powerful macro trends — the transition to a global cashless society and the rise of the emerging-market middle class. As electronic payments become a larger share of commerce, credit and debit cards — as well as newer payment methods such as PayPal — will increasingly replace cash and checks. And while this process is well on its way in the United States and other developed markets, it is only just beginning in most emerging markets. This is a trend that will be with us for a while.
Visa trades for 14 times expected 2012 earnings , which is a bargain for a company with Visa's brand, financial strength and growth prospects. DirecTV, Intel, and Visa are all long-term holdings of the Sizemore Investment Letter. And while Buffett's reasons for purchasing may have been very different from our own, we're glad to see the Oracle of Omaha sharing our enthusiasm.
URL:
Wednesday 9 November 2011
You can't bank on free speech
The banks, payment and credit card companies support extremist organisations by authorising transfers and donations to them. You can use VISA and MasterCard to donate to the Ku Klux Klan and the English Defence League. You can donate to Aryan Nations, a white supremacist organisation, despite being designated a "terrorist threat" by the FBI.
VISA and MasterCard do not mind if you decide to use your cards to buy pornography on the internet or a rifle identical to the one used by the right-wing extremist Andreas Breivik to murder 69 people in Norway. To justify such associations the banks erect a facade of political neutrality. But there is one conspicuous exception where the finance companies show their true face.
The extrajudicial banking blockade imposed upon WikiLeaks by VISA, MasterCard, Bank of America, Western Union and PayPal is unique and has been in place for almost a year.
This is an attempt against the very survival of the organisation as WikiLeaks depends entirely upon donations for its operations. Already this blockade has stripped away 95 per cent of its revenues. This is an historic act of censorship. Never before has an organisation dedicated to the fght for justice and basic rights; transparency, freedom of information, freedom of the internet and freedom of expression been hit with such a vicious attack.
There is more at stake here than simply the survival of WikiLeaks. When financial institutions decide to make it very difficult or almost impossible for you to make a donation they are infringing upon your basic human rights. They are stopping you from expressing your support for a cause.
The banking blockade of WikiLeaks might be a first but it will not be the last if it goes unchallenged.
Will the banks decide to block donations to Amnesty International, Greenpeace or Reporters Without Borders? Will they decide to stop processing transaction to media organisations that sell content on the internet? Or even more serious; will the threat of such a blockade stop any organisation, relying on donations, from being critical of the financial powers?
With some notable exception, there has been an absence of mass critical reporting on this blockade in the mainstream media. VISA, MasterCard, Bank of America, Western Union and Paypal get away with declining to comment or by making vague references to illegality by WikiLeaks.
'Banksters'
This is easily refuted as WikiLeaks has not been convicted or charged with any wrongdoing in any jurisdiction. Even the Danish sub-contractor of VISA in Europe found nearly a year ago that nothing in WikiLeaks operations contravened laws or VISA regulations.
Moreover, despite political pressure, Timothy Geithner, the US Secretary of the Treasury, found in January 2011 that there were no lawful grounds to blacklist WikiLeaks and its publishing is protected by the 1st Amendment.
And yet, the banking giants of this world continue to impose this unlawful and unethical blockade. Fighting the blockade is a matter of priority for WikiLeaks but the outcome goes far beyond the interest of the publishing organisation. The first legal step in the fight has already been taken by asking for the intervention of the competition department of the European Commission. It is primarily aimed at VISA and MasterCard, the American companies who together process 97 per cent of European card transactions. Further steps are being prepared.
I am no stranger to the devastating effect of the banks. My home country Iceland is still suffering from the aftermath of the total collapse of the banking sector in October 2008. Although the Icelandic bankers claim to have been victims of outside forces, secret documents revealed by WikiLeaks show a different story.
WikiLeaks has published hundreds of documents exposing corruption and illegality within the banks. Initially bank secrecy had the aim to protect the privacy of costumers. Now it has become a tool to hide the wrong doing of the banks themselves at the expense of their account holders and as we have seen recently, the population at large.
Corrupt bankers (or "banksters", as they are called in Iceland) have an interest in silencing WikiLeaks as is evident in the unprecedented illegal steps taken by VISA, MasterCard, PayPal, WesternUnion and Bank of America.
We call upon everyone to assist us in this important fight. We have seen clearly what bankers' greed can do to our economies. We cannot allow them to directly infringe on our basic human rights.
URL: http://english.aljazeera.net/indepth/opinion/2011/11/20111189344715970.html
VISA and MasterCard do not mind if you decide to use your cards to buy pornography on the internet or a rifle identical to the one used by the right-wing extremist Andreas Breivik to murder 69 people in Norway. To justify such associations the banks erect a facade of political neutrality. But there is one conspicuous exception where the finance companies show their true face.
The extrajudicial banking blockade imposed upon WikiLeaks by VISA, MasterCard, Bank of America, Western Union and PayPal is unique and has been in place for almost a year.
This is an attempt against the very survival of the organisation as WikiLeaks depends entirely upon donations for its operations. Already this blockade has stripped away 95 per cent of its revenues. This is an historic act of censorship. Never before has an organisation dedicated to the fght for justice and basic rights; transparency, freedom of information, freedom of the internet and freedom of expression been hit with such a vicious attack.
There is more at stake here than simply the survival of WikiLeaks. When financial institutions decide to make it very difficult or almost impossible for you to make a donation they are infringing upon your basic human rights. They are stopping you from expressing your support for a cause.
| |
Will the banks decide to block donations to Amnesty International, Greenpeace or Reporters Without Borders? Will they decide to stop processing transaction to media organisations that sell content on the internet? Or even more serious; will the threat of such a blockade stop any organisation, relying on donations, from being critical of the financial powers?
With some notable exception, there has been an absence of mass critical reporting on this blockade in the mainstream media. VISA, MasterCard, Bank of America, Western Union and Paypal get away with declining to comment or by making vague references to illegality by WikiLeaks.
'Banksters'
This is easily refuted as WikiLeaks has not been convicted or charged with any wrongdoing in any jurisdiction. Even the Danish sub-contractor of VISA in Europe found nearly a year ago that nothing in WikiLeaks operations contravened laws or VISA regulations.
Moreover, despite political pressure, Timothy Geithner, the US Secretary of the Treasury, found in January 2011 that there were no lawful grounds to blacklist WikiLeaks and its publishing is protected by the 1st Amendment.
And yet, the banking giants of this world continue to impose this unlawful and unethical blockade. Fighting the blockade is a matter of priority for WikiLeaks but the outcome goes far beyond the interest of the publishing organisation. The first legal step in the fight has already been taken by asking for the intervention of the competition department of the European Commission. It is primarily aimed at VISA and MasterCard, the American companies who together process 97 per cent of European card transactions. Further steps are being prepared.
I am no stranger to the devastating effect of the banks. My home country Iceland is still suffering from the aftermath of the total collapse of the banking sector in October 2008. Although the Icelandic bankers claim to have been victims of outside forces, secret documents revealed by WikiLeaks show a different story.
WikiLeaks has published hundreds of documents exposing corruption and illegality within the banks. Initially bank secrecy had the aim to protect the privacy of costumers. Now it has become a tool to hide the wrong doing of the banks themselves at the expense of their account holders and as we have seen recently, the population at large.
Corrupt bankers (or "banksters", as they are called in Iceland) have an interest in silencing WikiLeaks as is evident in the unprecedented illegal steps taken by VISA, MasterCard, PayPal, WesternUnion and Bank of America.
We call upon everyone to assist us in this important fight. We have seen clearly what bankers' greed can do to our economies. We cannot allow them to directly infringe on our basic human rights.
URL: http://english.aljazeera.net/indepth/opinion/2011/11/20111189344715970.html
Tuesday 8 November 2011
Visa And MasterCard Battle Price-Fixing Litigation
Visa (NYSE:V) and MasterCard (NYSE:MA) were accused of price fixing by a trade group representing operators of automated teller machines. Visa and MasterCard require ATM operators to levy a service fee for any transaction at an ATM that is no less than the amount charged at that ATM for a Visa or MasterCard transaction even for transactions that don’t use the companies’ networks. [1]
In February this year, Visa and MasterCard were sued by merchants over swipe fees and the two companies have put any potential settlement of price-fixing litigation by merchants at about $4 billion. [2] If there is a negotiated settlement with all plaintiffs, MasterCard estimates its possible loss at $500 million.
According to MasterCard, it is not possible to put an upper limit on this loss due to the significantly higher demand by the class plaintiffs, which are not acceptable to the company. Visa and MasterCard argued that they can’t be accused of a conspiracy because the merchants don’t directly pay the interchange fees on payment-card purchases.
We have a price estimate of $90 on Visa, about the same as the current market price. We have a $350 estimate for MasterCard, which is slightly below the market price.
URL: http://seekingalpha.com/article/306288-visa-and-mastercard-battle-price-fixing-litigation
In February this year, Visa and MasterCard were sued by merchants over swipe fees and the two companies have put any potential settlement of price-fixing litigation by merchants at about $4 billion. [2] If there is a negotiated settlement with all plaintiffs, MasterCard estimates its possible loss at $500 million.
According to MasterCard, it is not possible to put an upper limit on this loss due to the significantly higher demand by the class plaintiffs, which are not acceptable to the company. Visa and MasterCard argued that they can’t be accused of a conspiracy because the merchants don’t directly pay the interchange fees on payment-card purchases.
We have a price estimate of $90 on Visa, about the same as the current market price. We have a $350 estimate for MasterCard, which is slightly below the market price.
URL: http://seekingalpha.com/article/306288-visa-and-mastercard-battle-price-fixing-litigation
Monday 7 November 2011
Smart Investors Are Switching to Plastic: MA, V, AXP
If consumer sentiment soured last quarter, it appears that MasterCard (MA) cardholders were curiously immune. Earlier this week, the company announced third-quarter revenues were up 27%, and the dollar volume of purchases made using MasterCard-branded credit and debit cards rose 18%. Earnings per share were up an almost mind-blowing 43%. Not bad, given that we might technically be in a recession. MasterCard’s results followed stellar (if slightly more modest) results from rival Visa (V). For the quarter ended September 30, Visa earnings per share were up 20%. Most companies would kill for 20% EPS growth; only when compared to MasterCard does it look a little shabby.
American Express (AXP), MasterCard and Visa’s smaller rival that caters primarily to business customers, reported earnings last month. Earnings per share were up 14% for the quarter. Again, not bad given the condition of the economy.
Figure 1: MasterCard, Visa, and American Express
Not surprisingly, all three card stocks have enjoyed a healthy rally this year. MasterCard is the clear winner, up nearly 70% year-to-date, but Visa too has had a nice run. Both of these stocks had been held back by uncertainty surrounding the implementation of the Dodd-Frank Durbin Amendment’s restrictions on debit card swipe fees. (American Express was unaffected, as the company issues only credit cards and not debit cards.)
In lumping American Express with MasterCard and Visa, we’re not quite comparing apples to apples. AmEx actually makes loans and accepts credit risk. MasterCard and Visa do not; they simply allow banks to issue credit cards branded with their logos, and the issuing banks accept the credit risk. MasterCard and Visa also get a significant amount of their revenues from debit cards; American Express does not.
So, while I consider America Express “safe” in that its clientele tends to be high-quality borrowers, without a debit card business I consider the company’s growth to be limited. Thus, we’ll focus only on MasterCard and Visa.
Some of the rocket-like outperformance of these stocks this year was thanks to the Durbin uncertainty being lifted (note the vertical spike in both MasterCard and Visa in late June after the Fed’s favorable ruling), but there also are two powerful tailwinds supporting these companies:
By some estimate, as much as 40% of transactions in the U.S. still take place with cash or paper checks, and the percentage is significantly higher in most emerging markets. Suffice it to say, MasterCard and Visa will have healthy demand for their credit and debit cards for the foreseeable future, regardless of what happens to the economy. If retail sales were to experience zero growth in the years ahead, MasterCard and Visa would be able to enjoy at least modest gains purely from consumers switching to plastic from cash or checks.
MasterCard and Visa also are well positioned to profit from the rise of the new emerging-market middle class. Visa gets close to half of its revenues from outside the United States, and MasterCard gets more than half. Much of this is from the fast-growing economies of Asia, Latin America and the Middle East. Expect to see these percentages rise in the years ahead. While the U.S. and Europe remain mired in a cycle of debt deflation, emerging markets continue to grow, and millions of people formerly trapped in poverty join the ranks of middle class consumers every year.
Neither MasterCard nor Visa are “cheap” in strict value-investor terms; the companies trade at 17 and 16 times their respective 2012 earnings estimates. Still, this slight premium is worth paying for two high-quality, high-growth companies supported by long-term trends.
URL: http://www.gurufocus.com/news/151398/smart-investors-are-switching-to-plastic-ma-v-axp
American Express (AXP), MasterCard and Visa’s smaller rival that caters primarily to business customers, reported earnings last month. Earnings per share were up 14% for the quarter. Again, not bad given the condition of the economy.
Figure 1: MasterCard, Visa, and American Express
Not surprisingly, all three card stocks have enjoyed a healthy rally this year. MasterCard is the clear winner, up nearly 70% year-to-date, but Visa too has had a nice run. Both of these stocks had been held back by uncertainty surrounding the implementation of the Dodd-Frank Durbin Amendment’s restrictions on debit card swipe fees. (American Express was unaffected, as the company issues only credit cards and not debit cards.)
In lumping American Express with MasterCard and Visa, we’re not quite comparing apples to apples. AmEx actually makes loans and accepts credit risk. MasterCard and Visa do not; they simply allow banks to issue credit cards branded with their logos, and the issuing banks accept the credit risk. MasterCard and Visa also get a significant amount of their revenues from debit cards; American Express does not.
So, while I consider America Express “safe” in that its clientele tends to be high-quality borrowers, without a debit card business I consider the company’s growth to be limited. Thus, we’ll focus only on MasterCard and Visa.
Some of the rocket-like outperformance of these stocks this year was thanks to the Durbin uncertainty being lifted (note the vertical spike in both MasterCard and Visa in late June after the Fed’s favorable ruling), but there also are two powerful tailwinds supporting these companies:
- The macro move towards a global cashless society.
- The rise of the emerging-market consumer.
By some estimate, as much as 40% of transactions in the U.S. still take place with cash or paper checks, and the percentage is significantly higher in most emerging markets. Suffice it to say, MasterCard and Visa will have healthy demand for their credit and debit cards for the foreseeable future, regardless of what happens to the economy. If retail sales were to experience zero growth in the years ahead, MasterCard and Visa would be able to enjoy at least modest gains purely from consumers switching to plastic from cash or checks.
MasterCard and Visa also are well positioned to profit from the rise of the new emerging-market middle class. Visa gets close to half of its revenues from outside the United States, and MasterCard gets more than half. Much of this is from the fast-growing economies of Asia, Latin America and the Middle East. Expect to see these percentages rise in the years ahead. While the U.S. and Europe remain mired in a cycle of debt deflation, emerging markets continue to grow, and millions of people formerly trapped in poverty join the ranks of middle class consumers every year.
Neither MasterCard nor Visa are “cheap” in strict value-investor terms; the companies trade at 17 and 16 times their respective 2012 earnings estimates. Still, this slight premium is worth paying for two high-quality, high-growth companies supported by long-term trends.
URL: http://www.gurufocus.com/news/151398/smart-investors-are-switching-to-plastic-ma-v-axp
Visa and MasterCard Debit Cards
Visa and MasterCard have both confirmed that they are looking into offering their debit cards in Canada. These would be similar to the Interac cards that we’re familiar with here. Interac is a non-profit organization, owned by the banks and credit unions, its fees are based on the cost of processing transactions.
While increased competition is normally good for the consumer and can lead to lower prices, in this case it will likely mean higher fees. These fees would be charged to the merchants that accept the cards and could easily by twice the amount of the current Interac fees. While the customer won’t be directly paying these fees, the merchants will likely pass this expense on to the customer through higher prices.
There are already a couple signs that we’re in for higher merchant fees in Canada.
- Canada’s existing debit system is “broken,” said Kevin Stanton, president of MasterCard Canada, saying it’s one of the few countries in the world where a non-profit monopoly controls the market, resulting in irrational pricing that precludes true market competition. – Toronto Star
- Interac has asked the Competition Bureau about restructuring itself as a for-profit entity to compete with Visa and MasterCard, which are trying to increase their share of the debit card market. – Toronto StarURL: http://canadianfinanceblog.com/visa-and-mastercard-debit-cards/
Friday 4 November 2011
Meredith Whitney Downgrades Visa, MasterCard to ‘Outperform’
Nov. 3 (Bloomberg) -- Meredith Whitney, the bank analyst who predicted “hundreds of billions of dollars” of municipal defaults, downgraded Visa Inc. and MasterCard Inc. to “outperform” from “buy,” an employee of her firm said.
Meredith Whitney Advisory Group cut the two companies today, Marc Lombardo, a research analyst, said in a phone interview. The research firm has a five-tier rating system, with “buy” at the top, followed by “outperform.”
Whitney had “buy” ratings on Visa and MasterCard since she started coverage in March 2010, according to data compiled by Bloomberg. She called Visa her “single best buy” during an interview with Bloomberg Radio on May 4, 2010. The stock had climbed 3.5 percent since then through yesterday, compared with a 5.5 percent gain for the Standard & Poor’s 500 Index.
Visa and MasterCard, the world’s biggest payments networks, plunged last year after U.S. lawmakers approved caps on debit- card transaction fees as part of the Dodd-Frank Act. The shares rebounded this year as consumers worldwide continued to shift to plastic from cash and checks.
MasterCard advanced 1.7 percent to $363.75 at 1:37 p.m. in New York after surging 60 percent in 2011 through yesterday, the top performance in the 75-company S&P 500 Information Technology Index. Visa, the index’s fifth-biggest gainer, climbed 1.9 percent to $93.19 after advancing 30 percent this year.
James Issokson, a spokesman for Purchase, New York-based MasterCard, and Erica Harvill of San Francisco-based Visa, declined to comment.
Whitney became a celebrity during the financial crisis after she correctly predicted that Citigroup Inc. would cut its dividend. Her call last year that there would be a wave of state and local government bond defaults has so far proved unfounded. Defaults totaled $1.13 billion in 2011, compared with $4.25 billion for all of 2010, Bank of America Corp. said in a Sept. 23 research note.
URL: http://www.businessweek.com/news/2011-11-03/meredith-whitney-downgrades-visa-mastercard-to-outperform-.html
Visa, MasterCard Estimate Potential Fee Settlement at $4 Billion
Visa Inc. (V) and MasterCard Inc. (MA), the world’s biggest payment networks, put any potential settlement of price-fixing litigation by merchants at about $4 billion.
MasterCard “extrapolated an estimate of a reasonably possible loss of at least $500 million if there is a negotiated settlement with all plaintiffs,” MasterCard Chief Executive Officer Ajaypal S. Banga said on an earnings conference call with investors yesterday.
In February, Visa, MasterCard and the banks being sued by merchants over swipe fees, or interchange, agreed that San Francisco-based Visa would be responsible for two-thirds of any settlement and Purchase, New York-based MasterCard would be responsible for about one-eighth. Visa has a litigation escrow account with $2.7 billion in cash available, it said in a regulatory filing. Those figures put a potential settlement at $4 billion.
The opposing parties yesterday argued before U.S. District Judge John Gleeson in Brooklyn, New York, on why he should rule in their favor without the need of a trial in the antitrust litigation, begun in 2005.
Banga didn’t say that any settlement was imminent, either in the class action or in suits brought by individual merchants including Publix Super Markets Inc. (PUSH), the Lakeland, Florida-based supermarket chain, and Rite Aid Corp. (RAD), the Camp Hill, Pennsylvania-based drugstore chain.
The merchants estimate damages in the case “will range in the tens of billions of dollars,” according to their complaint.
Visa and MasterCard argued they and banks including JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC) and Citigroup Inc. (C) can’t be accused of a conspiracy because the merchants don’t directly pay the interchange fees on payment-card purchases.
They also argued that the accusations are covered by a settlement in previous litigation and that the payment-card operators are now public companies, which set the fees themselves, rather than joint ventures of the banks.
The interchange fees on credit cards, which average about 2 percent of the purchase price, add up to $40 billion a year for retailers, not including debit cards.
Greene is a partner at Skadden, Arps, Slate, Meagher & Flom LLP in New York.
“The defendants’ rules and interchange fees increase merchants’ costs to accepting payment cards, and that shows harm to competition,” K. Craig Wildfang, a lawyer for the merchants, told Gleeson.
The lawsuit threatens a revenue source for banks that U.S. lawmakers left untouched in passing the Dodd-Frank Act financial overhaul last year. Congress opted to cap only debit-card interchange fees, which typically had cost merchants about half of what they pay to accept credit cards. The debit caps may cut annual revenue at the biggest banks by $8 billion, according to data compiled by Bloomberg Government.
The lawsuit contains allegations that the card companies’ rules, including those prohibiting merchants from steering customers to cheaper forms of payment, violate U.S. competition law. Last year, Visa and MasterCard settled with the U.S. government on such anti-steering allegations. New York-based American Express Co. (AXP), the biggest credit-card issuer by purchases, is fighting that suit.
The two sides also debated yesterday whether the networks’ rules preventing merchants from adding a surcharge to payment- card purchases violates antitrust law.
Visa, MasterCard and the banks argued in court papers that the case has to be tossed because the merchants have no standing to bring it: They don’t directly pay the interchange fees -- the merchants’ banks pay them to the cardholders’ banks, which pass them along to the merchants.
“Interchange fees are not paid by merchants,” David Graham, a lawyer for Citigroup at Sidley & Austin LLP in Chicago, told the judge yesterday.
Courts have refused to apply the 1977 case when the direct purchaser is a co-conspirator, as the merchants’ banks are, the plaintiffs argue.
“It’s undisputed that it’s merchants who pay the fee,” said Wildfang, a partner at Robins, Kaplan, Miller & Ciresi LLP in Minneapolis.
In 2003, Visa and MasterCard settled a separate antitrust class action, called In re Visa Check, for $3 billion. That case targeted debit-card rules.
“Plaintiffs do not challenge new conduct,” said Mark Ladner, a lawyer for Bank of America at Morrison & Foerster LLP in New York. “They simply challenge continued adherence to those rules.”
The merchants said they are alleging new antitrust injuries that came after the rules were reauthorized and new fee rates established.
The defendants also argue the banks no longer control the payment-card companies now that they are publicly traded, and don’t control the rate of the interchange fees. MasterCard conducted an initial-public offering in May 2006, Visa in March 2008. Before that, they were joint ventures owned by the banks.
Merchants argue the banks continue to control rules and interchange rates in a way that restrains competition or at least threatens anticompetitive effects.
“Visa and MasterCard were formed by competitors,” Wildfang said. “The defendants continue yesterday to abide by those rules.”
The merchants are also seeking to have the IPOs unwound, contending they lessen competition. Gleeson previously dismissed that argument, though he allowed the merchants to re-file it.
The case is In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, 05-md-1720, U.S. District Court, Eastern District of New York (Brooklyn).
URL: http://www.bloomberg.com/news/2011-11-02/visa-mastercard-put-potential-price-fixing-fee-settlement-at-4-billion.html
MasterCard “extrapolated an estimate of a reasonably possible loss of at least $500 million if there is a negotiated settlement with all plaintiffs,” MasterCard Chief Executive Officer Ajaypal S. Banga said on an earnings conference call with investors yesterday.
In February, Visa, MasterCard and the banks being sued by merchants over swipe fees, or interchange, agreed that San Francisco-based Visa would be responsible for two-thirds of any settlement and Purchase, New York-based MasterCard would be responsible for about one-eighth. Visa has a litigation escrow account with $2.7 billion in cash available, it said in a regulatory filing. Those figures put a potential settlement at $4 billion.
The opposing parties yesterday argued before U.S. District Judge John Gleeson in Brooklyn, New York, on why he should rule in their favor without the need of a trial in the antitrust litigation, begun in 2005.
Banga didn’t say that any settlement was imminent, either in the class action or in suits brought by individual merchants including Publix Super Markets Inc. (PUSH), the Lakeland, Florida-based supermarket chain, and Rite Aid Corp. (RAD), the Camp Hill, Pennsylvania-based drugstore chain.
‘Substantial Progress’
“While we’ve made substantial progress with the individual merchant plaintiffs, there has not been similar progress with the class plaintiffs,” he said. “At this time, it is not possible to put an upper limit on this loss due to the significantly higher demands by the class plaintiffs, which are unacceptable to MasterCard.”The merchants estimate damages in the case “will range in the tens of billions of dollars,” according to their complaint.
Visa and MasterCard argued they and banks including JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC) and Citigroup Inc. (C) can’t be accused of a conspiracy because the merchants don’t directly pay the interchange fees on payment-card purchases.
They also argued that the accusations are covered by a settlement in previous litigation and that the payment-card operators are now public companies, which set the fees themselves, rather than joint ventures of the banks.
The interchange fees on credit cards, which average about 2 percent of the purchase price, add up to $40 billion a year for retailers, not including debit cards.
‘Result of Competition’
“The level of interchange is not the result of any anticompetitive conduct,” Peter E. Greene, a lawyer for JPMorgan, told Gleeson yesterday. “That level is the result of competition.”Greene is a partner at Skadden, Arps, Slate, Meagher & Flom LLP in New York.
“The defendants’ rules and interchange fees increase merchants’ costs to accepting payment cards, and that shows harm to competition,” K. Craig Wildfang, a lawyer for the merchants, told Gleeson.
The lawsuit threatens a revenue source for banks that U.S. lawmakers left untouched in passing the Dodd-Frank Act financial overhaul last year. Congress opted to cap only debit-card interchange fees, which typically had cost merchants about half of what they pay to accept credit cards. The debit caps may cut annual revenue at the biggest banks by $8 billion, according to data compiled by Bloomberg Government.
Summary Judgment
Both sides have asked Gleeson for summary judgment in their favor now that discovery, or information-gathering, is done. They say a trial isn’t needed, at least on most counts, because there are no facts in dispute for a jury to decide. Gleeson said yesterday that he would rule on the motions at a later date.The lawsuit contains allegations that the card companies’ rules, including those prohibiting merchants from steering customers to cheaper forms of payment, violate U.S. competition law. Last year, Visa and MasterCard settled with the U.S. government on such anti-steering allegations. New York-based American Express Co. (AXP), the biggest credit-card issuer by purchases, is fighting that suit.
The two sides also debated yesterday whether the networks’ rules preventing merchants from adding a surcharge to payment- card purchases violates antitrust law.
Visa, MasterCard and the banks argued in court papers that the case has to be tossed because the merchants have no standing to bring it: They don’t directly pay the interchange fees -- the merchants’ banks pay them to the cardholders’ banks, which pass them along to the merchants.
Antitrust Violation
They cite a 1977 U.S. Supreme Court decision that said indirect buyers can’t claim they were injured by an antitrust violation.“Interchange fees are not paid by merchants,” David Graham, a lawyer for Citigroup at Sidley & Austin LLP in Chicago, told the judge yesterday.
Courts have refused to apply the 1977 case when the direct purchaser is a co-conspirator, as the merchants’ banks are, the plaintiffs argue.
“It’s undisputed that it’s merchants who pay the fee,” said Wildfang, a partner at Robins, Kaplan, Miller & Ciresi LLP in Minneapolis.
In 2003, Visa and MasterCard settled a separate antitrust class action, called In re Visa Check, for $3 billion. That case targeted debit-card rules.
Litigation Releases
As part of the settlement, the merchants can’t sue over conduct occurring before 2004. The defendants argue that release covers their current rules, which date from before 2004.“Plaintiffs do not challenge new conduct,” said Mark Ladner, a lawyer for Bank of America at Morrison & Foerster LLP in New York. “They simply challenge continued adherence to those rules.”
The merchants said they are alleging new antitrust injuries that came after the rules were reauthorized and new fee rates established.
The defendants also argue the banks no longer control the payment-card companies now that they are publicly traded, and don’t control the rate of the interchange fees. MasterCard conducted an initial-public offering in May 2006, Visa in March 2008. Before that, they were joint ventures owned by the banks.
Merchants argue the banks continue to control rules and interchange rates in a way that restrains competition or at least threatens anticompetitive effects.
“Visa and MasterCard were formed by competitors,” Wildfang said. “The defendants continue yesterday to abide by those rules.”
The merchants are also seeking to have the IPOs unwound, contending they lessen competition. Gleeson previously dismissed that argument, though he allowed the merchants to re-file it.
The case is In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, 05-md-1720, U.S. District Court, Eastern District of New York (Brooklyn).
URL: http://www.bloomberg.com/news/2011-11-02/visa-mastercard-put-potential-price-fixing-fee-settlement-at-4-billion.html
Thursday 3 November 2011
MasterCard In, Visa Out on Huntington's Debit Cards
By ANDREW R. JOHNSON
MasterCard Inc. has won branding rights on the debit-card portfolio of regional bank Huntington Bancshares Inc., a coup for the transaction processor as it tries to steal share from larger rival Visa Inc.Huntington said Thursday that it is replacing its customers' Visa debit cards with MasterCard-branded Platinum debit cards and expects the conversion to be done by Nov. 1. The portfolio includes about 1.5 million consumer and business debit cards.
"This is a big deal for us and a pretty big deal in the universe of card conversions as well," said Steve Steinour, chief executive of the Columbus, Ohio-based bank.
MasterCard, which has a small share of the debit-card market today, has been working to increase that business in the face of new federal restrictions on fees. The company said it is continually pursuing potential deals with banks but has no other U.S. debit portfolio wins to announce in the near term, said Chris McWilton, president of U.S. markets at MasterCard.
Huntington's debit-card customers made $6.7 billion in purchases in 2010, according to Nilson Report, a payments industry newsletter. MasterCard's U.S. debit purchase volume was $333 billion in 2010 compared with Visa's debit purchase volume of $1.05 trillion, according to Nilson.
A spokesman for Huntington declined to say how long its contract with MasterCard lasts but such agreements can run five to seven years in some cases. Financial terms of the contract weren't disclosed. The deal doesn't affect Huntington credit cards, which are issued by a Bank of America Corp. unit and include Visa's and MasterCard's brands.
While the logos of Visa and MasterCard appear on banks' credit and debit cards, the companies don't lend to consumers. Rather, they help process transactions made by the customers of their client banks.
"The more debit cards that have MasterCard's logo on them, the more payment volume and transactions MasterCard will be processing, and therefore the more revenue and profit MasterCard will be earning," said Jason Kupferberg, an analyst with Jefferies Group Inc.
A Visa spokesman declined to comment.
Executives at Purchase, N.Y.-based MasterCard and analysts have said its efforts could get a lift from the Durbin amendment, a provision in last year's Dodd-Frank financial regulation law that ushered in new rules for debit-card processing.
In addition to capping the fees that banks can charge merchants when a customer swipes a debit card, it also included provisions that require banks to offer merchants multiple processing options on their debit cards. The rationale for the requirement is having more options would create more price competition, saving money for merchants.
The so-called network exclusivity provision is expected to affect Visa more than MasterCard because Visa has more exclusive processing relationships with banks. MasterCard, which operates a debit processing network called Maestro, could win more deals as a result, analysts said.
MasterCard reports its earnings Nov. 2.
Visa's debit network, Interlink, will likely lose a portion of its transaction volume as a result of the regulations, Joseph Saunders, chairman and chief executive of Visa, said during the company's earnings conference call Wednesday.
But Mr. Saunders said he is confident pricing changes the company is rolling out will help Visa maintain its top position in the market.
URL:http://online.wsj.com/article/SB10001424052970203687504577001763009919848.html?mod=googlenews_wsj
Visa, MasterCard See Potential $4B Settlement
Visa Inc. (V) and MasterCard Inc. (MA), the world’s biggest payment networks, put any potential settlement of price-fixing litigation by merchants at about $4 billion.
MasterCard “extrapolated an estimate of a reasonably possible loss of at least $500 million if there is a negotiated settlement with all plaintiffs,” MasterCard Chief Executive Officer Ajaypal S. Banga said on an earnings conference call with investors yesterday.
In February, Visa, MasterCard and the banks being sued by merchants over swipe fees, or interchange, agreed that San Francisco-based Visa would be responsible for two-thirds of any settlement and Purchase, New York-based MasterCard would be responsible for about one-eighth. Visa has a litigation escrow account with $2.7 billion in cash available, it said in a regulatory filing. Those figures put a potential settlement at $4 billion.
The opposing parties yesterday argued before U.S. District Judge John Gleeson in Brooklyn, New York, on why he should rule in their favor without the need of a trial in the antitrust litigation, begun in 2005.
Banga didn’t say that any settlement was imminent, either in the class action or in suits brought by individual merchants including Publix Super Markets Inc. (PUSH), the Lakeland, Florida-based supermarket chain, and Rite Aid Corp. (RAD), the Camp Hill, Pennsylvania-based drugstore chain.
The merchants estimate damages in the case “will range in the tens of billions of dollars,” according to their complaint.
Visa and MasterCard argued they and banks including JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC) and Citigroup Inc. (C) can’t be accused of a conspiracy because the merchants don’t directly pay the interchange fees on payment-card purchases.
They also argued that the accusations are covered by a settlement in previous litigation and that the payment-card operators are now public companies, which set the fees themselves, rather than joint ventures of the banks.
The interchange fees on credit cards, which average about 2 percent of the purchase price, add up to $40 billion a year for retailers, not including debit cards.
Greene is a partner at Skadden, Arps, Slate, Meagher & Flom LLP in New York.
“The defendants’ rules and interchange fees increase merchants’ costs to accepting payment cards, and that shows harm to competition,” K. Craig Wildfang, a lawyer for the merchants, told Gleeson.
The lawsuit threatens a revenue source for banks that U.S. lawmakers left untouched in passing the Dodd-Frank Act financial overhaul last year. Congress opted to cap only debit-card interchange fees, which typically had cost merchants about half of what they pay to accept credit cards. The debit caps may cut annual revenue at the biggest banks by $8 billion, according to data compiled by Bloomberg Government.
The lawsuit contains allegations that the card companies’ rules, including those prohibiting merchants from steering customers to cheaper forms of payment, violate U.S. competition law. Last year, Visa and MasterCard settled with the U.S. government on such anti-steering allegations. New York-based American Express Co. (AXP), the biggest credit-card issuer by purchases, is fighting that suit.
The two sides also debated yesterday whether the networks’ rules preventing merchants from adding a surcharge to payment- card purchases violates antitrust law.
Visa, MasterCard and the banks argued in court papers that the case has to be tossed because the merchants have no standing to bring it: They don’t directly pay the interchange fees -- the merchants’ banks pay them to the cardholders’ banks, which pass them along to the merchants.
“Interchange fees are not paid by merchants,” David Graham, a lawyer for Citigroup at Sidley & Austin LLP in Chicago, told the judge yesterday.
Courts have refused to apply the 1977 case when the direct purchaser is a co-conspirator, as the merchants’ banks are, the plaintiffs argue.
“It’s undisputed that it’s merchants who pay the fee,” said Wildfang, a partner at Robins, Kaplan, Miller & Ciresi LLP in Minneapolis.
In 2003, Visa and MasterCard settled a separate antitrust class action, called In re Visa Check, for $3 billion. That case targeted debit-card rules.
“Plaintiffs do not challenge new conduct,” said Mark Ladner, a lawyer for Bank of America at Morrison & Foerster LLP in New York. “They simply challenge continued adherence to those rules.”
The merchants said they are alleging new antitrust injuries that came after the rules were reauthorized and new fee rates established.
The defendants also argue the banks no longer control the payment-card companies now that they are publicly traded, and don’t control the rate of the interchange fees. MasterCard conducted an initial-public offering in May 2006, Visa in March 2008. Before that, they were joint ventures owned by the banks.
Merchants argue the banks continue to control rules and interchange rates in a way that restrains competition or at least threatens anticompetitive effects.
“Visa and MasterCard were formed by competitors,” Wildfang said. “The defendants continue yesterday to abide by those rules.”
The merchants are also seeking to have the IPOs unwound, contending they lessen competition. Gleeson previously dismissed that argument, though he allowed the merchants to re-file it.
The case is In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, 05-md-1720, U.S. District Court, Eastern District of New York (Brooklyn).
URL:http://www.bloomberg.com/news/2011-11-02/visa-mastercard-put-potential-price-fixing-fee-settlement-at-4-billion.html
MasterCard “extrapolated an estimate of a reasonably possible loss of at least $500 million if there is a negotiated settlement with all plaintiffs,” MasterCard Chief Executive Officer Ajaypal S. Banga said on an earnings conference call with investors yesterday.
In February, Visa, MasterCard and the banks being sued by merchants over swipe fees, or interchange, agreed that San Francisco-based Visa would be responsible for two-thirds of any settlement and Purchase, New York-based MasterCard would be responsible for about one-eighth. Visa has a litigation escrow account with $2.7 billion in cash available, it said in a regulatory filing. Those figures put a potential settlement at $4 billion.
The opposing parties yesterday argued before U.S. District Judge John Gleeson in Brooklyn, New York, on why he should rule in their favor without the need of a trial in the antitrust litigation, begun in 2005.
Banga didn’t say that any settlement was imminent, either in the class action or in suits brought by individual merchants including Publix Super Markets Inc. (PUSH), the Lakeland, Florida-based supermarket chain, and Rite Aid Corp. (RAD), the Camp Hill, Pennsylvania-based drugstore chain.
‘Substantial Progress’
“While we’ve made substantial progress with the individual merchant plaintiffs, there has not been similar progress with the class plaintiffs,” he said. “At this time, it is not possible to put an upper limit on this loss due to the significantly higher demands by the class plaintiffs, which are unacceptable to MasterCard.”The merchants estimate damages in the case “will range in the tens of billions of dollars,” according to their complaint.
Visa and MasterCard argued they and banks including JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC) and Citigroup Inc. (C) can’t be accused of a conspiracy because the merchants don’t directly pay the interchange fees on payment-card purchases.
They also argued that the accusations are covered by a settlement in previous litigation and that the payment-card operators are now public companies, which set the fees themselves, rather than joint ventures of the banks.
The interchange fees on credit cards, which average about 2 percent of the purchase price, add up to $40 billion a year for retailers, not including debit cards.
‘Result of Competition’
“The level of interchange is not the result of any anticompetitive conduct,” Peter E. Greene, a lawyer for JPMorgan, told Gleeson yesterday. “That level is the result of competition.”Greene is a partner at Skadden, Arps, Slate, Meagher & Flom LLP in New York.
“The defendants’ rules and interchange fees increase merchants’ costs to accepting payment cards, and that shows harm to competition,” K. Craig Wildfang, a lawyer for the merchants, told Gleeson.
The lawsuit threatens a revenue source for banks that U.S. lawmakers left untouched in passing the Dodd-Frank Act financial overhaul last year. Congress opted to cap only debit-card interchange fees, which typically had cost merchants about half of what they pay to accept credit cards. The debit caps may cut annual revenue at the biggest banks by $8 billion, according to data compiled by Bloomberg Government.
Summary Judgment
Both sides have asked Gleeson for summary judgment in their favor now that discovery, or information-gathering, is done. They say a trial isn’t needed, at least on most counts, because there are no facts in dispute for a jury to decide. Gleeson said yesterday that he would rule on the motions at a later date.The lawsuit contains allegations that the card companies’ rules, including those prohibiting merchants from steering customers to cheaper forms of payment, violate U.S. competition law. Last year, Visa and MasterCard settled with the U.S. government on such anti-steering allegations. New York-based American Express Co. (AXP), the biggest credit-card issuer by purchases, is fighting that suit.
The two sides also debated yesterday whether the networks’ rules preventing merchants from adding a surcharge to payment- card purchases violates antitrust law.
Visa, MasterCard and the banks argued in court papers that the case has to be tossed because the merchants have no standing to bring it: They don’t directly pay the interchange fees -- the merchants’ banks pay them to the cardholders’ banks, which pass them along to the merchants.
Antitrust Violation
They cite a 1977 U.S. Supreme Court decision that said indirect buyers can’t claim they were injured by an antitrust violation.“Interchange fees are not paid by merchants,” David Graham, a lawyer for Citigroup at Sidley & Austin LLP in Chicago, told the judge yesterday.
Courts have refused to apply the 1977 case when the direct purchaser is a co-conspirator, as the merchants’ banks are, the plaintiffs argue.
“It’s undisputed that it’s merchants who pay the fee,” said Wildfang, a partner at Robins, Kaplan, Miller & Ciresi LLP in Minneapolis.
In 2003, Visa and MasterCard settled a separate antitrust class action, called In re Visa Check, for $3 billion. That case targeted debit-card rules.
Litigation Releases
As part of the settlement, the merchants can’t sue over conduct occurring before 2004. The defendants argue that release covers their current rules, which date from before 2004.“Plaintiffs do not challenge new conduct,” said Mark Ladner, a lawyer for Bank of America at Morrison & Foerster LLP in New York. “They simply challenge continued adherence to those rules.”
The merchants said they are alleging new antitrust injuries that came after the rules were reauthorized and new fee rates established.
The defendants also argue the banks no longer control the payment-card companies now that they are publicly traded, and don’t control the rate of the interchange fees. MasterCard conducted an initial-public offering in May 2006, Visa in March 2008. Before that, they were joint ventures owned by the banks.
Merchants argue the banks continue to control rules and interchange rates in a way that restrains competition or at least threatens anticompetitive effects.
“Visa and MasterCard were formed by competitors,” Wildfang said. “The defendants continue yesterday to abide by those rules.”
The merchants are also seeking to have the IPOs unwound, contending they lessen competition. Gleeson previously dismissed that argument, though he allowed the merchants to re-file it.
The case is In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, 05-md-1720, U.S. District Court, Eastern District of New York (Brooklyn).
URL:http://www.bloomberg.com/news/2011-11-02/visa-mastercard-put-potential-price-fixing-fee-settlement-at-4-billion.html
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