Independent ATM operators are launching a new legal attack on Visa Inc. and MasterCard Inc., in the latest challenge to the fees the networks charge and how they charge them.
The 13 machine operators and the National ATM Council, a trade association, filed a lawsuit seeking class-action status on Wednesday, accusing Visa and MasterCard of anticompetitive practices.
The group claims that Visa and MasterCard unlawfully control the fees that ATM operators are allowed to charge for transactions processed over third-party networks. According to the lawsuit, the rules prevent ATM operators from offering lower prices if customers withdraw money from machines using transaction networks that are not affiliated with Visa and MasterCard.
Coming on the heels of new federal debit interchange fee caps, the lawsuit is the latest challenge to the pricing practices of Visa and MasterCard. The two largest card networks have long set the prices that banks and other payments companies charge for processing transactions, but last year's Dodd-Frank Act put federal curbs on some of those practices and prices.
"It's no coincidence that [the lawsuit] is coming now right after some of the Durbin changes on the interchange fees," says David Albertazzi, a senior analyst with Aite Group. Effective Oct. 1, the Federal Reserve capped debit interchange under the so-called Durbin amendment to last years' Dodd-Frank Act.
"It seems like there's some kind of play against any kind of fee structure," Albertazzi says.
Visa and MasterCard are facing an increasing number of challenges over the power they wield over the payments system. Last year the companies settled a Department of Justice
Banks "have ceded broad power to Visa and MasterCard" to determine the terms and conditions of access to the companies' PIN networks, according to the lawsuit.
The operators argue that Visa and MasterCard "have misused this power" by setting rules that "suppress competition from PIN-based payment networks that compete with Visa and MasterCard's networks. … By preventing ATM operators from passing on cost savings to consumers in the form of lower prices, signaling the availability of more efficient, higher quality, or lower priced services, Visa and MasterCard escape the competitive discipline that would otherwise be brought to bear on them by competing PIN-based networks," the complaint says.
The plaintiffs are asking for treble damages, as well as a ruling forcing Visa and MasterCard to eliminate their rules governing access fees for third-party networks. But Albertazzi and other analysts downplayed the potential impact to the card networks' bottom lines.
"There's certainly a plausible antitrust argument in it," says Intrepid Ventures payments consultant Eric Grover. But "this is not a sink-the-enterprise suit…. I have a hard time seeing [it] adding up to a wreck-the-enterprise kind of number."
The complaint says that damages may amount to "tens of millions of dollars, prior to trebling" — which is relatively insignificant to behemoths Visa and MasterCard.
"It just seems that the dollars that are at risk [are] relatively small," says Keefe Bruyette & Woods analyst Sanjay Sakhrani.
He also questions the efficacy of the lawsuit, even if the ATM operators eventually win.
"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. "If these restrictive policies were eliminated, how much of an economic impact would there be?"
The lawsuit is National ATM Council, Inc. et al. v. Visa, Inc., et al. It was
MasterCard and Visa declined to comment on the lawsuit.
