Wednesday, July 19, 2023
Co-founders Jack Dorsey and Jim McKelvey established Square in February 2009 as a mobile app and payment facilitator. The company subsequently onboarded millions of sub-merchants, diversified its holdings and rebranded as Block Inc. in 2021, according to Square's website.
"Today, we're a partner to sellers of all sizes – large, enterprise-scale businesses with complex commerce operations, sellers just starting out, as well as merchants who began selling with Square and have grown larger over time," reads Square's About section at squareup.com. "Whether it's the food truck that's establishing a brick & mortar restaurant, the former sole proprietor adding her first employees, or the entrepreneur expanding from one location to ten, as our sellers scale, so do our solutions."
Citing millions of sub-merchants it converted from cash-only to card-accepting businesses, Block accused Visa and Mastercard of price fixing to lock in resulting revenue streams. Chief among Block's concerns is the honor-all-cards rule, which requires any merchant that accepts any one bank's general purpose credit (or debit) cards over a card network to accept all other general purpose credit (or debit) cards that carry that same network's brand, including select elite cards that the plaintiff claims are expensive to accept and process.
Block called the honor-all-cards rule unlawful and unnecessary for general purpose cards in circulation. These "all-or-nothing" rules have changed the game, the company added, by preventing card issuers from using competitive interchange offers to win Square's business.
"Pre-IPO, [member] banks exercised complete control over every aspect of Visa's and Mastercard's business," Block's legal counsel wrote, stating that member banks no longer compete with cost-effective products due to the card brands' accept-all-card guidelines and naming the following parties as co-conspirators:
"The co-conspirators include, but are not limited to, the following: (a) Issuers that have issued Visa and Mastercard payment cards and have agreed to inflate, set, and enforce, through anticompetitive rules and restraints, Visa and Mastercard Interchange Fees; (b) Acquirers that acquire Visa and Mastercard transactions from Square and who agreed to and have imposed the anticompetitive rules and restraints on Square; and (c) banks that have or had membership on Visa's or Mastercard's board of directors and, as described above, specifically adopted and agreed to impose the challenged rules and restraints upon Square, its Sellers, and other Payment Facilitators."
Block additionally noted that as Merchant of Record, Square directly contracts with Visa and Mastercard to facilitate card transactions on behalf of its millions of sellers, stating, "Consistent with Square's states as the Payment Facilitator and Merchant of Record, Square's Sellers do not have their own merchant identification numbers. Square's Sellers' transactions are, instead, processed under Square's MIDs." As such, Square noted its MIDs are subject to acquiring bank agreements with Chase Paymentech and Wells Fargo Merchant Services.
"While competition for merchant acceptance would have motivated rival Issuers to set lower fees than the 'default' Interchange Fees fixed by Visa and Mastercard, they have not done so because the Honor All Cards rules, working in tandem with the default Interchange Fee rules, eliminated any incentive for Issuers to charge fees below the high levels being fixed by the conspiracies," the plaintiff wrote, sealing its complaint with a request for a trial by jury.
A copy of the court record can be found at www.bloomberglaw.com/public/desktop/document/BlockIncvVisaIncetalDocketNo123cv05377EDNYJul142023CourtDocket/1?doc_id=X78MK72T15T955P71EUFJ8T4GUT 
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