Electronic Payments Coalition Statement on Kendall v. Visa U.S.A. Inc.

Washington, D.C. – The Electronic Payments Coalition issued the following statement in response to the Kendall v. Visa U.S.A. Inc. decision by the Court of Appeals for the Ninth Circuit:

The Electronic Payments Coalition welcomes the decision by the Ninth Circuit Court of Appeals that affirmed the dismissal of the Kendall case. The case brought antitrust claims by a small group of merchants against two networks and three banks based on interchange fees and merchant discount fees.

The Court recognized and confirmed that retailers do not pay interchange. They pay a merchant discount fee. In other words, the merchant discount fee effectively is the retail rate that merchants pay to their banks or credit unions for access to and utilization of the card system. Interchange fees essentially constitute the wholesale rate that banks and credit unions charge other banks and credit unions for card transactions.

The Court recognized that card networks do not set the merchant discount fee. Further, the Court recognized that banks set the merchant discount fee through the rational business decision to charge more than the fees that the banks themselves pay (i.e., the interchange fee). Circuit Judge Carlos T. Bea noted in his written Decision: “…much as the costs of eggs sets a floor for the price of an omelette on a menu. Just like the restaurateur, the banks charge the merchant a higher price than their cost of business to make a profit. This behavior suggests a rational business decision, not a conspiracy.”

Developed in this country in a highly competitive marketplace, the electronic payments system has revolutionized consumer purchasing power, generated more than $2.5 trillion in sales last year for U.S. merchants alone, and today processes more than 10,000 transactions per second around the globe. The electronic payments system has worked to the mutual benefit of both the retail and financial services industries, while facilitating enormous consumer choice, flexibility and satisfaction.

Read the entire decision >

MasterCard Response to the Kendall Decision >