Magazine article American Banker

First Data Accuses Visa of Stifling Competition

Magazine article American Banker

First Data Accuses Visa of Stifling Competition

Article excerpt

First Data Corp. has hit back at Visa U.S.A. by filing a counterlawsuit in a federal court accusing Visa of limiting competition, innovation, and choice in the payments industry with anticompetitive and monopolistic practices.

The countersuit, filed Tuesday in the U.S. District Court for the Northern District of California, is a response to a suit filed by the San Francisco-based credit card company in the same court in April. Visa's suit alleged trademark infringement and breach of contract, among other violations, by the Denver-based First Data.

The lawsuits pit the world's largest credit card brand against the world's largest processor of card transactions.

At issue is Visa's decision this past summer to stop allowing Visa-issuing banks, and merchant acquiring banks to bypass its VisaNet payment system in what it calls "private arrangements" with processors.

Charles T. Fote, First Data's president and chief executive officer, said it has taken advantage of such arrangements for 33 years. However, Visa's board voted in August to no longer permit them, except for a small percentage of grandfathered transactions.

In its suit, First Data claims that Visa has engaged in illegal tying, trade libel, unfair competition, defamation, and interference with prospective economic advantage. It also alleges that the card company breached its contractual obligations to First Data.

Visa's practice of forcing processors to move all their Visa-branded card transactions through VisaNet is anticompetitive, according to First Data's suit.

The processor is also challenging Visa's right to charge issuers a fee even if First Data moves the transaction to and from the merchant without using VisaNet. …

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