General purpose reloadable (GPR) prepaid card provider nFinanSe Inc. and prepaid card distributor InComm are locked in a legal battle over InComm's Vanilla Reload Network. At issue is whether InComm is engaged in price fixing and anti-competitive business practices over how it operates the reload network, and if nFinanSe in particular is the victim of those practices.
NFinanSe's initial lawsuit filed in October 2011 alleged that InComm attempted to coerce the Tampa, Fla.-based GPR card provider into a "price-fixing conspiracy" when it told nFinanSe it would not distribute nFinanSe's GPR cards unless nFinanSe agreed to join the Vanilla Reload Network and raise the fee it charges cardholders to reload its cards from $2.95 to $3.95.
In November 2011, InComm countered that its reload network is available to partners at a "generally accepted reload price point" and that "nFinanSe is free to participate or not participate on those terms at its discretion."
NFinanSe followed that rejoinder with a Jan. 17, 2012, preliminary injunction motion filed in the Atlanta district court that argued for the stoppage of InComm's reload network on the grounds that the network violates federal anti-trust law. NFinanSe also alleges in the motion that InComm's retaliatory actions to punish nFinanSe for refusing to join the network has left nFinanSe in a position where its viability as a business "hangs in the balance."
Three days later, InComm filed a motion to have nFinanSe's lawsuit dismissed. The motion contends that how InComm operates its reload network breaks no laws and that nFinanSe's allegations against InComm are "unsupported, implausible and legally meritless."
According to nFinanSe's lawsuit, InComm initiated talks about nFinanSe joining the Vanilla Reload Network around September 2010; it was at that time nFinanSe received its "first hint that InComm wanted to pressure nFinanSe on price."
NFinanSe said it refused to join the network under those terms, which would have forced the company to raise its reload fee by 34 percent and undermine its standing among consumers as a low-fee leader. NFinanSe contends its relationship with InComm subsequently deteriorated, to the point where InComm stopped distributing nFinanSe's Visa Inc.-branded GPR cards to new retailers. NFinanSe said InComm's actions have cost nFinanSe "millions" in lost revenue.
Additionally, nFinanSe claims InComm's reload network violates the Sherman Antitrust Act because it stifles competition by requiring its partners, which are competing sellers of different GPR cards, to charge consumers the same $3.95 reload fee and thereby deprive consumers of choice based on price. That action is compounded by InComm offering its own GPR card product on the network, nFinanSe said; as a "horizontal" competitor with nFinanSe on the same network, InComm thus has a vested interest in seeing nFinanSe's product not succeed.
NFinanSe said InComm distributes 90 percent of nFinanSe's GPR cards. NFinanSe's attorney, H. Lamar "Mickey" Mixson, characterized InComm as using its market dominance to force nFinanSe to raise its reload fee. "It's not only hardball, it's illegal," he said.
In its motion, InComm said "there is nothing inherently unlawful about InComm's unilateral decision to set a $3.95 reload fee for the services it offers in the reload network" and that no factual evidence exists that InComm conspired with other GPR card providers to fix the reload price.
Additionally, InComm said it had a written agreement with nFinanSe to distribute its Discover Financial Services-branded GPR cards to retailers, but that no written agreement existed for the distribution of nFinanSe's Visa-branded cards. InComm said it made it clear to nFinanSe that it reserved the right to distribute the Visa GPR cards at its discretion and that it didn't distribute the cards to new retailers on a "case-by-case basis."
InComm's attorney, Debra D. Bernstein, stressed that nFinanSe is under no obligation to join the reload network or raise its reload fee. "First of all, they're in reload networks outside of InComm that already offers them the ability to reload," she said. "They can continue to reload the card they have. InComm currently distributes their GPR card and distributes their reload card. And that [distribution] option will still be available to them for the retailers at which they are currently being distributed."
In regard to the Vanilla Reload Network, Bernstein said, "Just like any service, services have a fee associated with them, and this is the fee set. It is unrelated to [nFinanSe]."
Bernstein stated that InComm's new reload network represents a pro-competitive, technological advancement for the industry. The reload network is designed to consolidate multiple reload packs into a single pack, underscored with a single, uniform reload fee (which is required based on the technology available for reload packs), that would work with all of its partners' GPR cards, she said.
The program eliminates the necessity by retailers to stock different reload packs for different GPR cards and makes it easier for GPR card users to reload cards, Bernstein noted. She added that InComm is expanding its "swipe" reload technology for the Vanilla Reload Network that would eliminate reload packs altogether so that cardholders can reload cards at the POS without having to buy reload packs.
Bernstein expects the pending motions to be resolved in the next few months. 
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