Appellate Court Reinstates ATM Fee Lawsuit Against Visa and MasterCard

A federal appellate court on Tuesday reinstated a proposed class-action lawsuit over ATM pricing rules that independent ATM operators and consumers filed against Visa Inc. and MasterCard Inc. in 2011 but a district court dismissed in 2013.

The ruling originated with three lawsuits filed by the National ATM Council Inc., a Jacksonville, Fla.-based trade group of ATM independent sales organizations, and several ATM ISOs and some consumers. The suits alleged that Visa and MasterCard rules prohibiting lower surcharges for ATM transactions that didn’t go over the their networks amounted to price fixing in violation of the Sherman Act.

The U.S. District Court in Washington, D.C., dismissed the cases before they came to trial, saying the plaintiffs had not established standing through showings of injury or the potential for redress, and that they had failed to show restraint of trade under the Sherman Act’s terms.

“We disagree, and so we vacate and remand these cases for further proceedings based on the proposed amended complaints,” the appellate decision says. The court heard arguments on the appeal Feb. 20.

“We are gratified that the appellate court recognized the unlawfulness of the restrictions on ATM pricing that have for years allowed Visa and MasterCard to prevent ATM operators from charging consumers less for using lower-cost non-Visa or non-MasterCard services,” Jonathan Rubin, managing member of the Washington-based antitrust law firm Rubin PLLC, lead counsel for the NAC and the ATM ISOs, said in a statement. “The anticompetitive rules have protected Visa and MasterCard from competition for network services 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 Visa spokesperson said the company would have no comment. MasterCard did not respond to a Digital Transactions News request for comment late Tuesday afternoon.

The plaintiffs are seeking unspecified damages and a ruling that would prevent Visa and MasterCard from restricting how they charge fees.

The appellate decision traces the revenue flows for retail ATMs, noting that independent deployers have two major income streams. The first is interchange, paid by the card issuer to the ATM operator, less any network fees. The second is what the court calls an “access fee” paid by the cardholder, more commonly known as a surcharge. Most U.S. ATMs are plugged into the Visa and MasterCard networks as well as debit networks such as Star, NYCE, Pulse, Accel, and others.

“MasterCard and Visa generally charge high network-services fees, which means that ATM operators receive low net interchange fees–running between 6 cents and 29 cents for domestic transactions, and even less for international transactions–for transactions on these networks,” the appellate court ruling says. “Several competing networks charge comparatively low network-services fees, thus enabling an ATM operator to collect a higher net interchange fee (up to 50 cents per transaction) when using the lower-fee networks.”

But the Visa and MasterCard rules about non-discrimination in surcharges ban higher access fees for transactions on those networks than the access fees operators charge for other networks, the ruling says. That means operators can’t try to compensate for lower net interchange on Visa and MasterCard transactions by imposing higher surcharges.

“Thus, under the Access Fee Rules, operators cannot say to cardholders: “We will charge you $2.00 for a MasterCard or Visa transaction, but if your card has a Star or Credit Union 24 bug on it, we will charge you only $1.75,” the ruling says.

The United States has approximately 425,000 ATMs, about half of which are operated by independent ATM operators.