Antitrust Law Daily Dispute over credit card interchange fees continues with appeal to Second Circuit
Thursday, August 13, 2020

Dispute over credit card interchange fees continues with appeal to Second Circuit

By Jody Coultas, J.D.

The credit card holders will appeal denial of motion for relief from final judgment.

Visa and MasterCard credit card holders have appealed to the U.S. Court of Appeals in New York City a decision by the federal district court in Brooklyn that they lacked standing to sue the credit card companies under Section 4 of the Clayton Act. In July, the district court found that although there was a change in decisional law, prior decisions by the district court and Second Circuit that the cardholders lacked standing. The court also declined to address additional arguments that there were extraordinary circumstances that warranted vacating the judgment (Salveson v. JP Morgan Chase & Co., August 11, 2020).

In December 2013, the cardholders filed suit in the Northern District of California, alleging that Visa and MasterCard and their issuing and acquiring banks conspired to fix credit card interchange fees paid by consumers to the issuing banks. The cardholders asserted claims for violations of Section 1 of the Sherman Act, Section 4 of the Clayton Act, and the California Cartwright Act. In June 2014, the case was transferred to the Eastern District of New York. The court granted the defendant banks’ motion to dismiss all claims in November 2014 and entered judgment in December 2014.

The U.S. Court of Appeals in New York City found that the cardholders’ putative class claims were barred by the Illinois Brick indirect purchaser standing rule because the cardholders did not directly pay the interchange fee, rather they only paid the full price for the item or service they purchased. Thus, the court held that the district court committed no error in denying the plaintiffs’ motion for reconsideration and refusing to grant leave to amend. A petition for certiorari filed by the cardholders was denied by the Supreme Court.

In 2018, the district court allowed the cardholders to brief on whether they were entitled to any relief in light of Ohio v. American Express Co. [(Amex II)] as well as the district court’s decision in In Re Payment Interchange Fee & Merchant Discount Antitrust Litigation permitting various groups of plaintiffs in the multidistrict litigation to amend their complaints to add an "alternative two-sided definition of the relevant market." The cardholders then moved for relief from final judgment, arguing that in light of the Amex II and Apple v. Pepper, the court must now find that the cardholders are "consumers of the transactions product offered by the credit-card network[s]," and that "they directly purchase that product from the network participants and therefore have standing under Illinois Brick."

At the outset, the court agreed with the cardholders that Amex II represented a change in the law and was not controlling law at the time the Second Circuit affirmed the February 14, 2016 decision. However, that change in the law had no bearing on whether the cardholders’ had standing under Illinois Brick and did not disturb the prior reasoning of either the Second Circuit or district court decisions.

In the previous ruling at issue, the district court’s finding that the cardholders lacked standing under Illinois Brick rested in part on the court’s understanding that the "markets for general purpose payment cards and for payment card network services are separate and distinct," with cardholders participating only in the former. That framework no longer reflected courts’ understanding of the credit card market in the context of relevant market analysis in antitrust cases in light of Amex II’s ruling that "the credit-card market" is a "two-sided transaction platform," in which "transactions are ‘jointly consumed by a cardholder, who uses the payment card to make a transaction, and a merchant, who accepts the payment card as a method of payment.’" However, Amex II did not disturb the reasoning that the cardholders did not directly pay the interchange fee. While the decisions would be written differently today, the outcome would be the same because nothing about the structure of the transaction at issue changed.

The cardholders appealed that decision.

Attorneys: Jamie Lynne Miller (Alioto Law Firm) for Melvin Salveson. Timothy Alan Miller (Skadden Arps Slate Meagher & Flom LLP) for JP Morgan Chase & Co. and J.P. Morgan Bank, N.A. Jeffrey K. Rosenberg (Morrison & Foerster) for Bank of America Corp.

Companies: JP Morgan Chase & Co.; J.P. Morgan Bank, N.A.; Bank of America Corp.

MainStory: TopStory Antitrust NewYorkNews GCNNews

Back to Top

Interested in submitting an article?

Submit your information to us today!

Learn More

Antitrust Law Daily: Breaking legal news at your fingertips

Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on antitrust legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.