In In re: ATM Fee Antitrust Litigation, the Ninth Circuit upheld the dismissal of a long-running class action against Bank of America, JP Morgan Chase, and other banks alleging that ATM interchange fees were the product of an illegal agreement. The court held that bank customer plaintiffs lacked standing to sue for damages because they are indirect purchasers.
In July 2004, bank customers sued the banks in First Data’s Star ATM network, alleging that the network’s banks paid unlawfully inflated ATM fees that they then passed on to their customers through foreign ATM transaction fees.
The Ninth Circuit held that the plaintiffs lacked standing under the U.S. Supreme Court‘s 1977 Illinois Brick decision, which held that only direct purchasers can sue for damages. The complaint alleged that the banks pass on inflated interchange fees imposed by the network when a plaintiff uses a foreign ATM. But the plaintiffs failed to allege that the banks – from whom they are direct purchasers — conspired to inflate the charges. As a result, the plaintiffs constituted indirect purchasers of the networks ATM services.
The plaintiffs had argued that the ATM fee should be viewed as fixed markup charged directly to the bank customer. But the complaint did not allege that the banks agreed to pass on ATM fees as fixed markups.
Update: The court has held that the plaintiffs must formally seek approval of the proposed settlement by October 19, 2012.
In In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, the defendants have agreed to a $7.25 billion settlement of multidistrict litigation in the Eastern District of New York.
Plaintiff merchants filed the 2005 case alleging that the Visa and MasterCard associations and large banks conspired to increase the fees paid by merchants to accept credit cards. If the court approves the settlement, a class of approximately seven million card-accepting merchants will receive $6.05 billion for past damages and an eight-month fee reduction anticipated to total approximately $1.2 billion. Visa and MasterCard also agreed to settle with merchant plaintiffs that had filed separately for $525 million. Interestingly, Visa will bear the larger share of the two settlements, $4.4 billion to MasterCard’s $790 million.
In addition to the monetary payments, Visa and MasterCard will modify their network rules to (1) allow retailers to surcharge credit card transactions; and (2) form merchant buying groups to negotiate interchange rates collectively.
As a class action settlement, court approval is required. Approval is not assured, given that at least three significant class members and a retailers group have opposed the settlement. The National Association of Convenience Stores, a plaintiff, and The National Retail Federation, which is not a party, immediately announced their opposition to the settlement on the ground that it does not do enough to create competition in the setting of merchant credit card fees. Within a short time, major retailers Target and Wal-Mart also opposed the settlement. Target stressed that it failed to provide a long-term solution for what a spokesman described as a “broken system,” stressing that it had no interest in surcharging its customers and did not want to give up the option to sue in the future if rates remained unreasonably high. Issuing a statement a day after Target, a Wal-Mart spokesman echoed its competitor’s objections to the settlement, claiming that it “would not structurally change the broken market or prohibit credit card networks from continually increasing hidden swipe fees” and “would require merchants to broadly waive their rights to take action against the credit card networks for detrimental conduct or acts.”
In McGarvey et al. v. Penske Automotive Group Inc. et al., the Third Circuit refused to reinstate a proposed class action against Penske Automotive Group Inc., finding consumers failed to establish that the warranty on a vehicle anti-theft system included an unlawful tying arrangement. The warranty in question provided that in the event a vehicle covered by the anti-theft system is stolen, the customer will get a credit of up to $7,500 toward the purchase of a replacement vehicle at a specific dealership listed on the warranty. In their suit, plaintiffs claimed that the warranty violated the Magnuson-Moss Warranty Act (MMWA)’s anti-tying provision because it required consumers to purchase a replacement vehicle from a particular dealership in order to benefit from the warranty. The court disagreed and held that the warranty did not violate consumers’ “clearly established legal right” under the MMWA because the act fails to spell out exactly what that right is. According to the court’s opinion, “the MMWA’s legislative history and FTC guidelines suggest that the MMWA prohibits tying arrangements for articles or services that are unrelated to redeeming the warranty benefit. However, as in cases like this one, where the condition applies to parts or services that the consumer must pay for in the process of redeeming the warranty benefit, it is unclear whether the prohibition of tying arrangements applies.”
In Polypore International Inc. v. Federal Trade Commission, the Eleventh Circuit upheld the FTC’s ruling, requiring Polypore International Inc. to divest of assets gained in its $76 million acquisition of Microporous Products LP. In 2008, The FTC filed a complaint to block Polypore’s $76 million purchase of Microporous because the deal substantially reduced competition in the market for battery separators. In November 2011, FTC upheld a large portion of an administrative court’s decision, finding that the merged company could substantially lessen competition by creating a monopoly for several types of battery separators. Polypore appealed this decision to the Eleventh Circuit, arguing that the FTC should have treated Microporous as a potential competitor, and not as a current competitor because Microporous was not actually making or selling battery separators. The Eleventh Circuit disagreed, and held that while Microporous may not have actually sold products in the automotive battery market at the time of acquisition, it had been investigating entry into that market for several years. And, according to the court, “the Clayton Act is about probabilities and not certainties.”
In U.S. v. Ghavami, Southern District of New York Judge Kimba M. Wood denied a motion to dismiss part of an indictment against three former UBS AG executives over alleged fraud schemes and bid-rigging related to contracts in the municipal bond market. In their motion to dismiss, defendants argued that a five-year statute of limitations applied to the wire fraud and bid-rigging charges because the government’s reliance on a series of settlement and non-prosecution agreements between financial institutions and state authorities is insufficient to show a direct relationship between the charged conduct’s effects on the financial institutions. The court disagreed, holding that the statute of limitations for this case is 10 years because the government’s proffered evidence, if proven at trial, is sufficient to show that the alleged offenses “affected” a financial institution.
Defendants also argued that the indictment violates the Constitution’s double jeopardy clause because three of the counts are based on the same conduct, but are presented as separate conspiracies, instead of one count of conspiracy. The court rejected that argument as premature and held that if the jury will convict defendants on what the court will ultimately determine to be multiplicitous counts, the court will enter judgment on only one of the multiplicitous convictions.
The court also denied defendants’ motion for a bill of particulars, holding that the government provided defendants with sufficient information to advise them of the nature of the charges against them, to enable them to prepare a defense, and to avoid unfair surprise at trial.
In In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, the defendants have agreed to a $7.25 billion settlement of multidistrict litigation being litigated in the Eastern District of New York.
Plaintiff merchants filed the 2005 case alleging that the Visa and MasterCard associations and large banks conspired to increase the fees paid by merchants to accept credit cards. If the court approves the settlement, a class of approximately seven million card-accepting merchants will receive $6.05 billion for past damages and an eight-month fee reduction anticipated to total approximately $1.2 billion. Visa and MasterCard also agreed to settle with merchant plaintiffs that had filed separately for $525 million. Interestingly, Visa will bear the larger share of the two settlements, $4.4 billion to MasterCard’s $790 million.
In addition to the monetary payments, Visa and MasterCard will modify their network rules to (1) allow retailers to impose a surcharge on credit transactions; and (2) form merchant buying groups to negotiate interchange rates collectively.
As a class action settlement, court approval is required. Approval is not assured, given that the National Association of Convenience Stores, a plaintiff, and The National Retail Federation, which is not a party, have come out in opposition to the settlement on the ground that it does not do enough to create competition in the setting of merchant credit card fees.
In Agnew et al. v. NCAA, the Seventh Circuit dismissed a proposed price-fixing class action against the NCAA. In October 2010, the name plaintiff, a former Rice University football player, filed a Sherman Act claim, alleging that NCAA member institutions ran a degree price-fixing scheme. For years, the complaint alleges, the schools agreed that they would never offer student-athletes multiyear athletic scholarships or grants. In addition, they were alleged to have placed artificial caps on the number of scholarships and grants the each school could offer to athletes. These arrangements, the class claimed, reduced competition in the market for bachelor’s degrees and student-athlete labor.
In opposing the NCAA’s motion to dismiss, the class argued that the court could use a “quick-look” analysis to analyze the anti-competitive effect on the market. The court disagreed and held that although plaintiffs may sometimes avoid showing that an agreement had anti-competitive effects, they must show that a relevant market existed. And in this case, the court held, plaintiffs failed to do so. The court also noted that a bachelor’s degree market, as asserted by the plaintiffs, would include many more people than scholarship athletes. As a result, the anti-competitive impact of an NCAA bylaw would likely be very minimal. Furthermore, bachelor’s degrees are not automatically received upon the payment of tuition because students pay for the opportunity to earn a bachelor’s degree, not the actual degree. The complaint therefore failed to identify a product market for bachelor’s degrees.
Lastly, the court rejected the class’s attempt to identify a labor market for student-athletes, noting that although such a market might well exist, plaintiffs had not identified it in their amended complaint.
In Evergreen Partnering Group, Inc. et al. v, Pactiv Corp. et al., Massachusetts District Court Judge Richard G. Stearns, dismissed with prejudice Evergreen Partnering Group, Inc.’s antitrust suit against Solo Cup Co. and other disposable food container giants. The court found that Evergreen had not provided any details to support its claims of conspiracy against the defendants, including any details of how they had communicated with each other or exactly what they had said to deter each other from teaming up with Evergreen. The court further held that “Evergreen, as a putative supplier of recycled resin, did not compete against the producer defendants, but instead sought to partner with them in establishing a business model highly beneficial to Evergreen as the designated exclusive supplier. Thus, it is unclear how defendants’ sometime refusal to deal with Evergreen could have had an anti-competitive effect on the market.”
In Williams et al. v. Duke Energy International, Inc. et al., the Sixth Circuit found that a putative antitrust class action, alleging that Duke Energy Corp. gave unlawful rebates to General Motors Co. and several major corporations, was wrongfully dismissed by an Ohio federal court. In 2009, the lower court ruled that because of the filed-rate doctrine — which prevents challenges to the reasonableness of utility rates that have been approved by regulatory bodies — the case belonged in front of the Public Utilities Commission of Ohio. The Sixth Circuit disagreed, holding that plaintiffs do not challenge whether the rates set by the PUCO were reasonable; rather, they contend that Duke conspired to aid certain favored companies in avoiding paying the actual filed-rate, which harmed plaintiffs by giving the favored companies a competitive advantage. The court further held that the filed-rate doctrine is inapplicable in this case because it applies only to challenges to the underlying reasonableness or setting of filed rates. Since the federal filed-rate doctrine does not apply, the district court mistakenly dismissed the suit on the grounds that it didn’t have standing to rule on the plaintiffs’ state law claims.
Brazil’s Ministries of Justice and Finance raised the thresholds for transactions to trigger a review under the country’s new preclosing merger control system. Under the new law, the minimum levels of turnover needed to require an antitrust review went from 400 million reais ($201 million) for one party and 30 million reais for the other to 750 million reais and 75 million reais, respectively. This is a key time for Brazil’s Administrative Counsel for Economic Defense (CADE), as it tries to clear deals more quickly now that they require antitrust approval before closing, while it struggles to hire the necessary staff. The changes should help lessen CADE’s workload by reducing the number of deals that the antitrust agency will have to examine amid the transition.