MasterCard Seeks Injunction Against Visa Exit-Fees
asterCard International has filed a motion in federal court seeking an injunction to put a stop to Visa USA's new rules that impose heavy fees on its member banks terminating their Visa membership. MasterCard said Visa's policy is anti-competitive.
"This is nothing more than a thinly-veiled effort to block competition and cling to business they might otherwise lose," said MasterCard General Counsel Noah Hanft in a statement. "Visa is changing the rules mid-stream and bullying its members so it becomes virtually impossible for them to switch brands."
Following Visa and MasterCard's April 2003 combined $3 billion settlement with millions of retailers over debit card fees, Visa implemented new bylaws in June that would penalize its top 100 debit card issuers with fines if they left the Visa network.
The amount of fees charged by Visa would depend on the bank's share of Visa's debit card issuance and how much time is left for Visa to complete payment of its part of the settlement (both Visa and MasterCard have 10 years to pay off the remaining balances of their settlements, which are about $2 billion and $1 billion, respectively).
The cost of Visa's settlement falls on its member banks, and Visa's concern is that if its top issuers leave the Visa network, thus reducing debit card volume, then the smaller remaining member banks would be unfairly burdened with the settlement costs.
Minnesota-based TFC Financial Corp., a bank that handles more than $800 million in debit card transactions each quarter, had explored terminating its membership status with Visa following the settlement. Visa told TFC it would have to pay up to $20 million to do so.
MasterCard said it filed the motion against Visa in U.S. District Court for the Southern District of New York after Visa failed to act on a "cease and desist" letter from MasterCard, demanding that Visa revoke the bylaw. District Court Judge Barbara Jones will hear arguments on the case on October 30, 2003.
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