When Does a Group Discussion Constitute Collusion?

  A federal lawsuit filed this summer charges eight of the largest credit card issuers with collusion in establishing mandatory arbitration clauses, which they include in their cardholder agreements.
  The class-action complaint, Ross vs. Bank of America, was filed in August in U.S. District Court for the Southern District of New York. It alleges that starting in the late 1990s, Bank of America Corp., MBNA Corp., J.P. Morgan Chase & Co., Capital One Financial Corp., Citigroup, Providian Financial Corp., HSBC Holdings Plc. and Discover Financial Services, issuer of the Discover Card, held secret meetings to discuss mandatory arbitration clauses in cardholder agreements. The lawsuit contends those discussions amounted to collusion in violation of federal antitrust laws. American Express Co. and Wells Fargo & Co. are named as co-conspirators.
  A Citigroup representative said the allegations are "without merit" but would not comment further. Representatives for the other defendants would not comment.
  A plaintiff win in the suit could strike the issuers' mandatory arbitration clauses and lead to victories against issuers and credit card networks in related cases. Some experts say a finding of antitrust collusion could inhibit the free speech of competitors wanting to discuss issues of mutual concern, while others say it would appropriately protect free-market competition.
  The complaint charges that by participating in numerous meetings and communications, and because of their "immense market power," the issuers "combined, conspired and agreed to implement and/or maintain mandatory arbitration clauses as a term and condition of sale." The Berger & Montague law firm of Philadelphia and several other firms represent the plaintiffs, which include seven individuals who hold Visa, MasterCard, AmEx and Discover credit cards. The cardholders want the issuers' arbitration clauses to be declared unlawful and removed from their cardholder agreements.
  The suit alleges that the banks met at least 20 times from 1999 to 2003 to discuss the wording of mandatory arbitration clauses. The "Arbitration Coalition" or "Arbitration Group," as attendees allegedly called themselves, also discussed the placement of the clauses in cardholder agreements and how to ensure the clauses could be enforced, the suit contends.
  The issuers later formed the "Consumer Class Action Working Group" and the "In-House Counsel Working Group," according to the complaint.
  The complaint alleges that two law firms gave the banks advice in creating the groups or attended their meetings. The firms, Wilmer Cutler Pickering Hale and Dorr, of Washington, D.C., and Boston, and Ballard Spahr Andrews & Ingersoll, of Philadelphia, are not defendants in the suit and declined to comment about the litigation.
  The issuers added mandatory arbitration clauses into cardholder agreements deep within the fine print of statement stuffers where, the plaintiffs allege, few cardholders would read them. Simply continuing to use the cards constituted an agreement to the new terms.
  Competitors often discuss issues of mutual importance, but some subjects are more likely than others to violate the Sherman Antitrust Act. "If banks meet to talk about some money-laundering issue, that's fine," says David Balto, a former Federal Trade Commission policy director and now a partner at Robins Kaplan Miller & Ciresi. "But when you start to talk about how you go to market, how you attract consumers, that's where you start to get in trouble."
  Laurence Platt, an attorney at Kirkpatrick and Lockhart LLP, believes competitors should be able to discuss any topic as a matter of free speech. "There's no reason competitors can't get together to talk about issues," he says. "What they can't do is agree to a common set of terms and conditions for selling their products."
  If the issuers did meet to discuss mandatory arbitration clauses, plaintiffs' attorneys still would have to prove that they agreed to certain terms of arbitration, Balto says. They would not have to show that the resulting clauses were identical.
  Oral arguments in the case are scheduled to begin in February on defendants' motions to dismiss the complaint.
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