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NAC case against Visa, Mastercard going forward

The National ATM Council Inc. and 13 independent ATM operators will get their day in court with Visa Inc., Mastercard and assorted card-issuing banks. The U.S. Supreme Court’s Nov. 17, 2016, reversal of the defendants’ appeal will enable the class action lawsuit to be tried in Washington, D.C.’s Federal District Court.

NAC and ATM operators seek injunctive relief and illumination of rules related to debit card network pricing. Plaintiffs are challenging current pricing mechanisms that Visa, Mastercard and affiliated issuing banks use for setting ATM access fees, claiming the schemes are both anticompetitive and a form of price fixing.

“The crux of the Plaintiff’s complaints is that when someone uses a non-bank ATM, the cardholder pays a greater fee and the ATM operator earns a lower return on each transaction because of Visa and Mastercard rules,” wrote Circuit Court Judge Robert Wilkins in an August 2015 ruling that was later appealed. “These rules prohibit differential pricing based on the cost of the network that links the ATM to the cardholder’s bank.”

Bruce Renard, Executive Director at NAC, is confident the case will stand on its own merits, following five years of delays. “NAC is genuinely pleased with the order of summary dismissal issued yesterday by the United States Supreme Court,” he said. “The anti-competitive rules at issue have protected Visa and Mastercard from competition for network services at retail ATMs, with the result that consumers have been paying inflated prices for using ATMs, and fewer ATMs were deployed than otherwise would have been the case.”

A long fight

NAC and 13 additionally named plaintiffs filed the original complaint in 2011 against what they deemed to be high-priced ATM fees; two similar but isolated consumer class actions were also filed during the same period against major U.S. banks. The card brands and banks questioned the cases’ legal merits, leading the D.C. Federal District Court to dismiss all three proceedings.

NAC successfully appealed the District Court’s dismissal in 2013, winning reinstatement of the case at the U.S. Circuit Court in 2015. The Circuit Court ruled unanimously in NAC’s favor, setting a trial date with D.C. District Court Judge Richard Leon. Visa, Mastercard and affiliated banks fought to dismiss the case, escalating the issue to the U.S. Supreme Court.

The Supreme Court reviewed the defendants’ formal brief on Nov. 16, 2016, and dismissed it the following day. The precedent-setting decision from the nation’s highest court has set the stage for all parties to legally debate the merits and legality of debit network rules and pricing.

“It’s a small victory for the little guy, specifically the ATM operators, and most importantly the consumers, against a very big Goliath,” stated George Sarantopoulos, founder and CEO of Brooklyn, N.Y.-based Access One ATM and incoming NAC Board Chair. “Victories like this make you believe in the system again.”

Fair trade, fair pricing

Outgoing NAC Board Chair Bonnie Dalrymple noted the vital role independent ATM providers play in making cash available, particularly in urban and rural areas that exist outside national bank footprints. She and NAC board members remain cautiously optimistic about the upcoming trial. “Yesterday’s Supreme Court’s ruling is a real step forward for the interests of U.S. retail ATM entrepreneurs and the continued widespread access to cash for consumers throughout our nation,” she said.

NAC and its supporters are hopeful the lawsuit will resolve irregularities in ATM pricing for transactions processed on lower-cost debit card networks. Charging the same fees for transactions that ride traditional card brand rails as those processed outside of Visa and Mastercard networks amounts to price fixing, some ATM deployers have claimed.

Opponents of uniform pricing across all ATM networks allege the practice unfairly restricts trade and violates the Sherman Anti-Trust Act of 1890, legislation intended to outlaw monopolistic business practices. The card brand networks are preventing independent ATM operators from earning more for debit card transactions routed on lower-cost networks that are not connected to Visa and Mastercard networks, the plaintiffs stated.

“That mandate is the essence of the litigation and the basis for our argument,” Renard said. “NAC opposes charging disproportional access fees to end users.” NAC, a not-for-profit national trade association, represents the business interests of ATM owners, operators and suppliers.