Magazine article American Banker

Retailer Sues Visa to Eliminate Ban on Surcharge

Magazine article American Banker

Retailer Sues Visa to Eliminate Ban on Surcharge

Article excerpt

In what could be the first in a wave of legal attacks on the interchange system, an Atlanta retailer filed a lawsuit challenging Visa U.S.A.'s rule against levying surcharges for paying with credit cards.

MasterCard International, which the plaintiffs expect to drop its no-surcharge rules soon, is notably absent as a defendant.

The suit, which seeks class-action status, calls Visa's no-surcharge rule an "unlawful monopoly maintenance device, in violation of the Sherman Act and an unreasonable contract in restraint of trade." Animal Land Inc., a pet supply retailer, filed the suit May 6 in the U.S. District Court for the Northern District of Georgia.

Daniel I. Tarman, Visa's senior vice president of issues management, said, "In our view, the prohibition against surcharging is clearly pro-consumer. Merchants should not be able to penalize a consumer who chooses to pay with a Visa card."

One of the firms representing Animal Land, Friedman & Shube of New York, sued American Express Co. last year over its rule that merchants that accept its charge cards must also take its credit cards. In January, MBNA Corp. and Citigroup Inc. were added as defendants in that suit, because of their agreements to issue Amex cards.

Gary B. Friedman, a partner at Friedman & Shube, said that if surcharge rules were dropped, "you can expect interchange rates to drop" as payment brands compete for acceptance.

"Suddenly, consumers will care how much it costs to use a particular payment type," he said.

MasterCard rescinded its rules against surcharges in Europe last year; Mr. Friedman said that is why the plaintiffs expect it to do so in the United States.

A MasterCard spokeswoman, Sharon Gamsin, said "I can't comment on speculation by a plaintiff's attorney."

Mr. Tarman of Visa called the suit an indirect challenge to interchange, an issue merchants and the payment companies have been tussling over for some time. …

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