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US ATM anti-steering case: Judge tells counsel to streamline antitrust actions

Source: PaRR

  • Judge seeks case resolution, not 'a high-priced gaggle' of quarreling lawyers
  • Plaintiffs claim Visa and MasterCard's rules banning 'steering' block competition
  • Independent ATM operators want court to ban fees over EMV security chips

Visa and MasterCard could be sanctioned for ATM fees over EMV chips, but the judge hearing three anti-steering class actions against them told counsel that he has little appetite for “a high-priced gaggle of lawyers” needlessly protracting litigation.

“I love the word ‘efficiency’,” US District Judge Richard Leon told lawyers at a status hearing on 12 January, “and I am going to say something for the first time that you are not going to hear for the last time: Less is more. Less is more.” Leon sits in the District of Columbia in Washington DC.

The three class actions before him—one on behalf of independent ATM owner-operators, one by Visa and MasterCard ATM users and one by independent non-bank ATM users—challenge Visa and MasterCard’s rules preventing ATM operators from “steering” ATM users to payment options that charge ATM operators lower transaction fees. The cases were dismissed in 2013, but an appeals court vacated that ruling in October 2015, sending the cases back to the trial court—and a new judge—for litigation.

Plaintiffs allege that Visa and MasterCard’s agreement among themselves and with every card-issuing bank in their network violates the Sherman Act because it puts a horizontal restraint on the pricing of ATM access fees to customers at the point of sale. The card networksimpose horizontal restraints likewise on ATM access fee pricing by independent ATMs that compete with bank-owned and -operated ATMs, plaintiffs allege.

The rules and fee regime in effect “insulate” the payment card networks from competition, said Jonathan Rubin of Rubin PLLC which represents the non-bank ATM operators.

Leon told counsel that these cases realistically have about a 2% chance actually of going to trial. He added that the notion of “more documents, more depositions, more data and more experts might be good for billable hours, but it is not good for getting these cases resolved.”

The 12 January hearing opened on the issue the judge must decide first, which is whether to issue an injunction preventing Visa and MasterCard from charging fees to non-Visa-MasterCard ATM operators for not upgrading their systems to read the new EMV security chips. An EMV chip is a micro-processor that acts as a form of electronic data storage on credit cards. The acronym EMV derives from “Europay, MasterCard and Visa,” the companies that initiated development of the EMV specifications in 1994.

The networks say that they developed the chip to help reduce losses due to fraudulent credit card charges which historically have been absorbed by the issuers and only rarely by the merchants. MasterCard implemented its so-called “liability shift” for handling such charges in October 2015. Under this regime, liability “shifts” from the bank which issued the card to the merchant, unless the merchant has upgraded his system to read the chips. Visa’s liability shift takes effect in October 2017.

Merchants and ATM operators are assessed a “charge-back” fee in instances where there is a problem with a charge, and a “fall back” fee when a card processor’s system automatically defaults a payment to the metallic swipe which preceded the EMV technology.

Leon, after lending the lawyers a skeptical ear on the issue of the injunction, agreed to accept written briefs, and then to hear oral argument in April, and to issue an opinion in July. But he recommended that counsel in the meantime set up a plaintiffs’ and defense counsel working group, with one lawyer from each firm, to narrow down the factual and legal issues, and to settle among themselves as many issues as possible.

Leon acknowledged that he had little experience with antitrust litigation, but said that he had presided over In re Fannie Mae Securities Litigation a decade ago. He said that the case involved 30 million documents, 14 million of which were emails, of which he said a lawyer had admitted that less than 1000 were important. “Aw, come on! This is silly,” Leon said that he had replied.

Co-lead interim class counsel for the National ATM Council and independent ATM owner-operator plaintiffs are Rubin PLLC; Lukas, Nace, Gutierrez & Sachs; and the Mogin Law Firm. Co-lead interim class counsel for Visa/MasterCard-owned ATM user plaintiffs are Quinn Emanuel Urquhart & Sullivan; Hagens Berman Sobol Shapiro; and Mehri & Skalet. Non-bank-owned ATM user class plaintiffs are represented by Finkelstein Thompson and Lovell Stewart Halebian Jacobson.

Visa is represented by Arnold & Porter; MasterCard is represented by Paul, Weiss, Rifkind, Wharton & Garrison.

The cases are: The National ATM Council et al. v. Visa and MasterCard et al., no. 11cv1803; Mackmin et al. v Visa et al., no. 11cv1831; and Stoumbos v. Visa Inc. et al., no. 11cv1882, in the US District Court for the District of Columbia (Washington DC).

by Peter Geier in Washington DC


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