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Merchant Groups Sue Over Credit Card Fees

The plaintiffs allege that Visa, MasterCard and major banks colluded to charge excessive rates.

September 27, 2005|From Reuters

Four merchant groups have filed an antitrust lawsuit against Visa USA, MasterCard Inc. and dozens of major banks, saying they colluded to set excessive credit card fees.

The plaintiffs estimate damages "will range in the tens of billions of dollars," according to the 59-page class-action complaint, filed Friday with the U.S. District Court in Brooklyn, N.Y.

Bank of America Corp., Citigroup Inc. and JPMorgan Chase & Co., the largest U.S. credit card issuers, are among the more than 40 defendants. MasterCard and Visa already face other retailer lawsuits accusing them of price fixing.

The new case involves interchange fees, which retail merchants pay to issuing banks to receive payments for transactions involving the banks' cards.

Interchange fees make up the largest component of credit card fees and have long been a source of friction between retailers and card companies. The plaintiffs say U.S. interchange rates cost an average household $232 per year.

"The credit card interchange system serves as a hidden tax, both on merchants and consumers, and raises the costs of all products," said Hank Armour, chief executive of the National Assn. of Convenience Stores. "These credit card fees have rapidly increased over the past several years."

The plaintiffs in the new case include the National Assn. of Convenience Stores, the National Assn. of Chain Drug Stores, the National Community Pharmacists Assn. and the National Cooperative Grocers Assn.

They represent operators of more than 138,000 convenience stores, 60,000 pharmacies and about 120 cooperative groceries, the complaint said.

Visa spokesman Paul Cohen called interchange rates "a fair mechanism for fueling growth and sharing system costs."

MasterCard, in a statement, said the new lawsuit lacked merit, calling it "yet another example of merchants wanting the benefits of accepting payment cards without having to pay for the value of the services they receive."

Bank of America spokeswoman Shirley Norton declined to comment. Citigroup and JPMorgan did not immediately return calls. Visa is based in San Francisco and MasterCard in Purchase, N.Y.

The new lawsuit is similar to one filed in July by Kroger Co., Walgreen Co. and other retailers accusing Visa of setting fees too high.

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