Visa, MasterCard Accused of Price Fixing by ATM Operators

Visa Inc. and MasterCard Inc. (MA), the world’s biggest payment networks, were sued by a trade group representing operators of automated teller machines over claims the firms fix prices and suppress competition among ATM networks.

The group, in a lawsuit filed today in federal court in Washington, accused Visa and MasterCard of antitrust violations for restricting independent ATM operators from charging varying prices for customers using alternative networks such as STAR, Shazam Inc. or TransFund. Under a uniform agreement, the operators can’t charge less for transactions over a network that competes with Visa and MasterCard, according to the complaint.

The case is the latest assault on the firms, which are grappling with the effects of new Federal Reserve rules that reduced the fees charged to merchants for debit-card purchases. Visa and MasterCard processed cash transactions totaling at least $547 billion in the U.S. last year, including withdrawals from ATMs, according to company filings.

“The ATM restraints prevent ATM operators from offering their customers a discount or benefit for completing a transaction over a network that is less costly to the ATM operator,” the group contended in its complaint. “Consumers cannot be rewarded for using a lower cost and more efficient network.”

Trade Group

The allegations were made by the National ATM Council Inc., a trade group based in Jacksonville, Florida, and 13 operators of ATMs in nine states. The plaintiffs, who are asking to represent the 350 non-bank ATM operators nationwide, are seeking triple damages.

James Issokson, a spokesman for MasterCard, based in Purchase, New York, declined to comment, saying the company hadn’t been served with the suit. Will Valentine, a spokesman for San Francisco-based Visa, declined to comment on the filing.

The ATM operators claim that the “overwhelming” majority of so-called PIN debit cards used for ATM transactions are branded by Visa or MasterCard. In order to accept one of these cards, an ATM operator must have access to the Visa and MasterCard networks. Independent or non-bank operators must be sponsored by a financial institution that is a member of the Visa and MasterCard networks.

Service Fee

Visa, MasterCard and their member banks require the service fee for any transaction at an ATM to be “no less than the amount charged at that ATM or terminal for a Visa or MasterCard transaction,” even for transactions that don’t use the companies’ networks, the lawsuit alleges.

“By restricting their ability to attract customers to lower cost ATM services through lower prices, the ATM restraints put a competitive straightjacket on ATM operators,” the lawsuit claims.

Visa climbed 66 cents, or 0.7 percent, to $91.17 in New York Stock Exchange composite trading. MasterCard fell 0.5 percent to $327.99.

The case is National ATM Council v. Visa Inc. (V), 11-1803, U.S. District Court, District of Columbia (Washington).

To contact the reporter on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.