Mastercard Issues Statement to Dismiss Lawsuit
NEW YORK - Noah Hanft, general counsel for MasterCard International, has issued a statement concerning MasterCard's arguments for dismissing the Wal-Mart lawsuit against MasterCard and Visa. The lawsuit, which was filed in 1996, attacks the Honor All Cards rule. The rule requires that merchants who accept MasterCard accept all MasterCard-branded cards, including debit cards.
Hanft said the following:
"MasterCard and Visa today had the opportunity to tell federal district court Judge John Gleeson that, as a matter of law, the merchant antitrust lawsuit led by Wal-Mart should be dismissed prior to trial. For the first time since the lawsuit was filed in 1996, we were able to argue key substantive issues demonstrating that MasterCard's rules are pro-competitive and protect consumers' freedom of choice.
"We presented Judge Gleeson with strong evidence that neither plaintiffs' tying claim, nor their claim that MasterCard and Visa have conspired to monopolize the so-called debit market can be supported by fact, law, or the realities of today's marketplace.
"By attacking the Honor All Cards rule, which requires that merchants who accept MasterCard accept all MasterCard-branded cards, as an illegal tying arrangement, Wal-Mart and the other merchants are attempting to use the antitrust laws to take the choice of how to pay away from the consumer, and claim it for themselves. That claim is at odds with fact and antitrust laws. The Honor All Cards rule is not a "tie" within the meaning of antitrust law, and in fact, these types of rules are favored by antitrust law because they put more choices in the hands of consumers. The rule is a hallmark of all successful payment programs, including MasterCard, Visa, American Express, Discover and the regional ATM networks.
"The Honor All Cards rule has resulted in American consumers having the broadest range of payment choices in the world. Without it, innovation in the payment industry would come to a halt, as banks would need to negotiate with each merchant to accept each new payment option. Small merchants, without the negotiating power of giant retailers like Wal-Mart, could be significantly disadvantaged. Chaos at the cash register would be the likely result as consumers would have no guarantee that the card they choose to use would be accepted when they try to pay.
"The plaintiffs' tying claim is also defective because they cannot show that the Honor All Cards rule has foreclosed competition and prevented competing debit card providers from reaching either merchants or cardholders. The rule only requires that if a cardholder chooses to sign for a MasterCard- branded debit transaction, the cardholder be allowed to do so. In fact, MasterCard encouraged Wal-Mart and other retailers to install PIN pads and steer transactions towards the lower-cost online debit platform. Anyone who has been to Wal-Mart knows that every customer using a debit card is asked to enter their PIN number, so that the transaction is routed over an ATM debit network.
"The merchants' second claim that MasterCard and Visa have attempted to monopolize the point-of-sale debit market and suppress the growth of online debit again ignores the reality of the marketplace: the fact that regional ATM debit networks have been highly successful, and in recent years, online debit has been the fastest growing method of payment.
"The plaintiffs are seemingly oblivious to the fact that the number of PIN pads in U.S. stores has grown by more than 30 percent each of the last two years, and the number of times consumers used PIN debit grew by 32 percent from 2000 to 2001, and by 39 percent from 2001 to 2002. The STAR network alone handles 20 percent of all debit sales. Together, the STAR, PULSE and the other PIN debit networks handle more than 40 percent of debit card sales. Moreover, MasterCard has a long history of promoting Maestro, our online debit platform. The allegation that MasterCard somehow attempted to monopolize or suppress the point-of-sale debit market ignores MasterCard's history, as well as current marketplace realities.
"MasterCard also asked Judge Gleeson to dismiss the plaintiffs' absurd claim for billions of dollars in damages, as it is devoid of any factual support. It is, instead, based entirely on the guess-work of one economist, Dr. Franklin Fisher, who has ignored marketplace reality and a raft of evidence showing that merchants have benefited from taking signature debit cards. Because of similar deficiencies, two courts have recently disregarded damages theories offered by Dr. Fisher in other cases, and have dismissed those cases prior to trial. The plaintiffs' arguments are long on rhetoric and short on fact and we are confident that at the end of the day, this will become apparent and consumers will retain the ability to use their MasterCard-branded cards wherever they see the MasterCard logo displayed."
Hanft said the following:
"MasterCard and Visa today had the opportunity to tell federal district court Judge John Gleeson that, as a matter of law, the merchant antitrust lawsuit led by Wal-Mart should be dismissed prior to trial. For the first time since the lawsuit was filed in 1996, we were able to argue key substantive issues demonstrating that MasterCard's rules are pro-competitive and protect consumers' freedom of choice.
"We presented Judge Gleeson with strong evidence that neither plaintiffs' tying claim, nor their claim that MasterCard and Visa have conspired to monopolize the so-called debit market can be supported by fact, law, or the realities of today's marketplace.
"By attacking the Honor All Cards rule, which requires that merchants who accept MasterCard accept all MasterCard-branded cards, as an illegal tying arrangement, Wal-Mart and the other merchants are attempting to use the antitrust laws to take the choice of how to pay away from the consumer, and claim it for themselves. That claim is at odds with fact and antitrust laws. The Honor All Cards rule is not a "tie" within the meaning of antitrust law, and in fact, these types of rules are favored by antitrust law because they put more choices in the hands of consumers. The rule is a hallmark of all successful payment programs, including MasterCard, Visa, American Express, Discover and the regional ATM networks.
"The Honor All Cards rule has resulted in American consumers having the broadest range of payment choices in the world. Without it, innovation in the payment industry would come to a halt, as banks would need to negotiate with each merchant to accept each new payment option. Small merchants, without the negotiating power of giant retailers like Wal-Mart, could be significantly disadvantaged. Chaos at the cash register would be the likely result as consumers would have no guarantee that the card they choose to use would be accepted when they try to pay.
"The plaintiffs' tying claim is also defective because they cannot show that the Honor All Cards rule has foreclosed competition and prevented competing debit card providers from reaching either merchants or cardholders. The rule only requires that if a cardholder chooses to sign for a MasterCard- branded debit transaction, the cardholder be allowed to do so. In fact, MasterCard encouraged Wal-Mart and other retailers to install PIN pads and steer transactions towards the lower-cost online debit platform. Anyone who has been to Wal-Mart knows that every customer using a debit card is asked to enter their PIN number, so that the transaction is routed over an ATM debit network.
"The merchants' second claim that MasterCard and Visa have attempted to monopolize the point-of-sale debit market and suppress the growth of online debit again ignores the reality of the marketplace: the fact that regional ATM debit networks have been highly successful, and in recent years, online debit has been the fastest growing method of payment.
"The plaintiffs are seemingly oblivious to the fact that the number of PIN pads in U.S. stores has grown by more than 30 percent each of the last two years, and the number of times consumers used PIN debit grew by 32 percent from 2000 to 2001, and by 39 percent from 2001 to 2002. The STAR network alone handles 20 percent of all debit sales. Together, the STAR, PULSE and the other PIN debit networks handle more than 40 percent of debit card sales. Moreover, MasterCard has a long history of promoting Maestro, our online debit platform. The allegation that MasterCard somehow attempted to monopolize or suppress the point-of-sale debit market ignores MasterCard's history, as well as current marketplace realities.
"MasterCard also asked Judge Gleeson to dismiss the plaintiffs' absurd claim for billions of dollars in damages, as it is devoid of any factual support. It is, instead, based entirely on the guess-work of one economist, Dr. Franklin Fisher, who has ignored marketplace reality and a raft of evidence showing that merchants have benefited from taking signature debit cards. Because of similar deficiencies, two courts have recently disregarded damages theories offered by Dr. Fisher in other cases, and have dismissed those cases prior to trial. The plaintiffs' arguments are long on rhetoric and short on fact and we are confident that at the end of the day, this will become apparent and consumers will retain the ability to use their MasterCard-branded cards wherever they see the MasterCard logo displayed."