Independent ATM operators and a trade association are charging in a lawsuit against Visa Inc. and MasterCard Worldwide that the networks’ rules unlawfully prohibit ATM operators from offering lower prices for transactions over PIN-debit networks that are not affiliated with the two companies.
The National ATM Council, a trade association, and 13 independent operators from nine states filed the complaint Oct. 13 in U.S. District Court for the District of Columbia.
But industry observers are downplaying the potential effect of the litigation on the card networks or their bottom lines.
The plaintiffs seek class action status and a ruling forcing Visa and MasterCard to eliminate the access fee rules governing lower prices to other participants. The plaintiffs also ask for treble damages along with costs of the suit including attorneys’ fees.
“The member banks of Visa and MasterCard, and in particular the sponsoring institutions, have ceded broad power to Visa and MasterCard” to determine the terms and conditions of access to the companies’ PIN networks, the complainants say in the suit.
The card networks “have misused this power” according to the complaint, suggesting the rules set by Visa and MasterCard “suppress competition from PIN-based payment networks that compete with Visa and MasterCard’s networks by implementing a uniform horizontal agreement among U.S. banks to fix ATM access fees in a manner that ensures that the access fee for a transaction carried over a competing network is not less than the access fee charged for a transaction carried over Visa or MasterCard’s network.”
Visa and MasterCard are escaping the market effects of “competitive discipline” by preventing ATM operators from passing on cost savings to consumers in the form of lower prices, the complaint says.
Observers say the suit may have merits, but they are downplaying the implications of a loss for the card networks.
“It just seems like the dollars that are at risk [are] relatively small,” adds analyst Sanjay Sakhrani of Keefe Bruyette & Woods, pointing to the complaint which cites damages that could amount to “tens of millions of dollars, prior to trebling.”
Moreover, “even if there was more of an even playing field or there was more competition, the question is does it really drive volumes elsewhere?” Sakhrani says. “The question is, if these restrictive policies were eliminated, how much of an economic impact would there be?”
David Albertazzi, a senior analyst with Aite Group says, “The bad press is probably most of what I see as being the impact.”
MasterCard and Visa declined to comment on the suit.
