Article

Judge hears both sides in NAC v. Visa antitrust suit

DC judge hears motion-to-dismiss arguments in IADs' exchange fee-fixing lawsuit.

September 12, 2012

On Oct. 12, 2011, plaintiff's attorneys filed National ATM Council Inc., et al. v. Visa Inc., et al. Last week, the case finally had its first hearing before a U.S. District Court judge — not to decide its outcome, but simply to determine if and how it should move forward.

As it's been nearly a year since the case was filed, a recap might be in order. The following description of the complaint comes from a news release by Rubin PLLC, the Washington, D.C.-based antitrust law firm representing the plaintiffs.

A summary of 'National ATM Council Inc., et al. v. Visa Inc., et al.'

The lawsuit, filed in the U.S. District Court for the District of Columbia by the National ATM Council and several independent operators of automated teller machines, alleges that Visa and MasterCard's network rules prohibit ATM operators from offering lower prices for transactions over PIN-debit networks that are not affiliated with Visa or MasterCard. The suit alleges that the price fixing artificially raises the price that consumers pay for ATM services, limits the revenue that ATM-operators can earn, and violates the Sherman Act's prohibition against unreasonable restraints of trade.

According to the suit, ATM operators may charge an access fee to cardholders at the point of the transaction, but only if the fee is the same whether the machine is performing a Visa or MasterCard transaction or a transaction using another PIN-debit network. Visa and MasterCard networks can be more costly for operators to use, but the rules prevent an operator from offering consumers a discount for ATM transactions not completed over Visa or MasterCard's networks.

The lawsuit seeks damages against Visa and MasterCard for violating the antitrust laws. Plaintiffs' attorneys have asked the court to certify the case as a class action on behalf of all independent ATM operators and to declare Visa and MasterCard's restraints on ATM access fees unlawful. The attorneys also ask the court to enjoin Visa and MasterCard from restricting how operators charge ATM access fees in the future.

A summary of the District Court hearing

Bruce Renard, executive director of NAC sat in on last week's hearing and offers his thoughts as to how NAC (et al.) fared in the proceedings:

On September 5, Federal Judge Amy Berman Jackson of the U.S. District Court for the District of Columbia heard a solid four-and-a-half hours of oral arguments on the Defendants' (VISA/MasterCard/BofA/Wells Fargo) 12(b)(6) motion to dismiss class action antitrust complaints by NAC and the related consumer class.

There were approximately twenty lawyers present for the hearing and half a dozen lawyers actively presented oral argument for NAC, the consumer plaintiffs and the various defendants. Although Judge Berman admitted that this was her first antitrust case, she demonstrated an impressive judicial intellect and solid capability to handle the significant matters presented in the litigation. She was extremely well prepared for the hearing and asked dozens of very tough and insightful questions of both sides.

Following the oral argument, Judge Jackson indicated she would take the matter under advisement and cautioned that no one should interpret her questions as signaling her intended ruling, because she herself does not know how she will rule.

Despite that caveat, she made it clear from our perspective that she was not inclined to dismiss the case with prejudice. As such, the likely outcomes from the hearing are either: 1) a procedural dismissal without prejudice and with leave to amend the pleadings; or 2) an outright denial of the motion to dismiss.

While earlier on in the hearing Judge Jackson's questions could be interpreted to mean that the plaintiffs would be asked to amend the pleadings, at the end of the hearing, the Judge commented to the effect that if she were to order the plaintiffs to amend and we did so, there would not be much point to it; as a practical matter, the case would be back in the same posture as if the motion to dismiss had been denied in the first place.

NAC is very pleased to have Judge Jackson assigned to handle this litigation. Despite the Judge's very tough questioning of both sides, it appeared on balance that NAC and the consumer plaintiffs had a better day than did the defendants. Judge Jackson is very sharp and was able to cut through much of the defendants' mischaracterizations and misleading statements.

Moreover, Judge Jackson appears to be genuinely interested in the case and is taking it very seriously. Indeed, she said that she is going to reread all of the complaints and the key cases cited by the parties herself, and not just assign them to her law clerks as is often the case in federal court.

Even if NAC is required to file an amended complaint, it is clear that we have a highly capable jurist handling this litigation who will ensure that we receive fair treatment and our day in court. Although Judge Jackson did not say how long it would take for her to issue a ruling, it will likely be some time, since she will be doing all of the work herself.

Once the case progresses beyond the motion to dismiss stage, then discovery and the pre-trial procedural process will move forward apace. NAC and its legal team remain committed to aggressively and effectively prosecuting this important case.

NAC and the Independent ATM industry owes a significant thanks to the entire legal team for doing an excellent job on our behalf in preparing for this critical hearing—and heartfelt thanks and gratitude are extended to our lead counsel Jonathan Rubin for the exceptional job he did in presenting the oral argument. NAC is most fortunate to have such high caliber legal counsel representing the industry's interests in this vital, complex and far-reaching litigation.

For more on this topic, visit the regulatory issues research center.

photo: steakpinball