July 26, 2005

Visa, MasterCard win dismissal of merchant lawsuit

By Jonathan Stempel

NEW YORK (Reuters) - Visa USA and MasterCard International
have won dismissal of a lawsuit by California merchants that
accused the credit card associations of antitrust violations in
setting payment transaction fees.

Judge Jeffrey White of the U.S. District Court in San
Francisco on Monday also dismissed claims against Bank of
America Corp., Wells Fargo & Co. and U.S. Bancorp, saying the
merchants failed to allege a conspiracy to fix fees. He
dismissed the lawsuit without leave to amend, meaning the
merchants cannot bring their case again.

Richard Archer, a partner at Archer & Hanson in Occidental,
California who represented the merchants, said his clients plan
to appeal.

The case is unrelated to a lawsuit filed this month by
several supermarket and drugstore chains accusing Visa USA of
setting rules that limit competition and keep retailers from
negotiating lower transaction rates. The retailers, which
included Kroger Co. and Walgreen Co., did not name MasterCard
as a defendant in that case.

The California merchants had accused the card associations
of price fixing in setting "merchant discount fees," which are
transaction fees between merchants and banks, and "interchange
fees," which are fees between card association member banks.

White said the merchants could not get around a 1977 U.S.
Supreme Court antitrust ruling he said barred awarding damages
to them. He also said it was "uncontroverted" that neither Visa
nor MasterCard directly set merchant discount fees.

Noah Hanft, general counsel for MasterCard, and Josh Floum,
general counsel for Visa, in separate statements said they were
pleased with the decision and called interchange fees a fair
mechanism to apportion card transaction costs.

The original plaintiffs included Sheri Kendall, who
operated a beauty salon in Sonoma County, and James Maser, who
operated a restaurant in Alameda County.