New Class Action Lawsuit Alleges Visa, Mastercard, and Major Banks Inflate Merchant Fees

New Litigation Filed

A San Diego pizzeria has initiated a proposed class action lawsuit against Visa, Mastercard, and several major banks, including Bank of America, Capital One, Chase Bank, Citibank, and Wells Fargo. The lawsuit claims these entities have maintained a conspiracy to artificially inflate the fees merchants pay on credit card transactions. This new legal action comes despite a prior $5 billion class action settlement concerning similar allegations of anticompetitive market restraints.

Allegations of Anticompetitive Practices

The 134-page complaint asserts that the non-negotiable credit card transaction fees imposed by the defendants constitute "a deadweight toll on virtually every credit card purchase in America." It estimates these fees amount to hundreds of billions in "monopoly rents" at rates that would not exist in a competitive market. The lawsuit contends that Visa and Mastercard, in collaboration with the bank defendants, have established uniform interchange fee schedules for decades.

Mechanism of Alleged Conspiracy

The case charges that the defendants implemented a "web of anticompetitive rules" to maintain high interchange fees and prevent merchants from avoiding them. These restraints allegedly disable market forces that could control credit card transaction costs. One key restraint cited is forcing merchants who accept any Visa or Mastercard credit card to accept all such cards, regardless of cost, thereby removing incentives for banks to compete by lowering fees. The lawsuit also claims merchants are prevented from steering customers towards lower-cost payment options, such as through surcharging based on card type.

Financial Impact on Merchants

The lawsuit states that these alleged restraints have prevented competition among issuing banks and other credit card networks, allowing financial institutions to raise their fees annually without consequence. The class action filing claims that merchants now pay over $100 billion annually in fees to accept Visa and Mastercard credit cards, enriching the defendants at the merchants' expense.