Supreme Court Just Says 'No' to Visa, MasterCard

T he two biggest payment associations in the world went to the highest court in the land to do battle with the planet's largest retailer in hopes of having a ruling changed. On June 10, 2002, the U.S. Supreme Court rejected the appeal by Visa and MasterCard challenging the class-action status handed down previously by a lower court.

This is the latest proceeding in an antitrust lawsuit initiated in 1996 on behalf of nearly four million retailers across the country, including Wal-Mart, Sears, Roebuck & Co., and Safeway. In turning down the appeal without comment, the justices let stand an October 2001 ruling by the Second U.S. Court of Appeals in New York, which voted 2 to 1 to allow the class certification. The case may now be heard and decided by a federal judge in Brooklyn.

The retailers accuse Visa and MasterCard of wielding their considerable influence to enforce their policy requiring merchants to accept any card with a Visa or MasterCard logo, or to "honor all cards."

In their original lawsuit, the plaintiffs allege that Visa and MasterCard force merchants to accept their branded signature-based debit cards, which are more expensive to process than PIN-based debit or credit cards. Signature-based purchases are routed through the Visa and MasterCard networks and carry higher interchange fees than PIN-based purchases, which are routed through regional networks like the STAR system.

Attorneys for the retailers argued that the district court had thoroughly examined all of the evidence before certifying the class action. The associations argued that the district judge who originally heard the case should have looked more closely at whether a lawsuit of this size, involving so many plaintiffs, would be manageable and whether the plaintiffs even have enough in common to qualify for class status.

Visa and MasterCard claim the plaintiffs are seeking as much as $100 billion from the card associations, an amount they say is so high they would be forced into settling, regardless of the merits of the claims. The retailers say the amount of damages they're seeking is much lower - between $13 billion and $15.8 billion. But under antitrust law, those claims could triple, totaling $39.3 billion to $47.6 billion. The plaintiffs say the associations included in their figures $63 billion of potential savings to merchants.

Noah J. Hanft, General Counsel for MasterCard International, said, "By not taking this opportunity to clarify the confusing standards for class certification that exist among district and appellate courts today, the Supreme Court may be opening the doors to increasing class-action abuse."

Kelly Presta, Visa USA Vice President, said, "The real irony is that when consumers choose to pay with the Visa check card, they are actually saving these major corporations money by eliminating the potential for bounced checks and the time spent processing paper checks at the checkout counter. We believe consumers should make the choice whether to use cash, check, debit or credit card for their purchases."

Lloyd Constantine, the plaintiffs' attorney, called the decision a victory for merchants and consumers and said, "The debit and credit card cartel has stalled the judicial process every step of the way, squeezing every last penny out of their hidden tax on consumers until the day they know is coming - when the courts order this policy stopped."