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National ATM Council, Inc. v. Visa Inc.

United States District Court, District of Columbia

February 13, 2013

NATIONAL ATM COUNCIL, INC., et al., Plaintiffs,
VISA INC., et al., Defendants. Andrew Mackmin, et al., Plaintiffs,
Visa Inc., et al., Defendants. Mary Stoumbos, Plaintiff,
Visa Inc., et al., Defendants.

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Daniel A. Small, Kit A. Pierson, Laura M. Alexander, Jeffrey B. Dubner, Cohen Milstein Sellers & Toll PLLC, Jonathan Laurence Rubin, Rubin PLLC, Washington, DC, David Allen Lafuria, Brooks E. Harlow, McLean, VA, for Plaintiffs.

Mark R. Merley, Matthew A. Eisenstein, Kenneth Anthony Gallo, Washington, DC, Andrew C. Finch, Gary R. Carney, New York, NY, for Defendants.



Sometimes the bank is just too far away. So customers in need of cash will avail

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themselves of automatic teller machines (" ATMs" ) at banks other than their own, or at convenience stores, gas stations, nail salons, and numerous other places. When they do, they will be advised: " This ATM will charge a fee of $2.50 for this transaction. This fee is in addition to any fees which may be charged by your financial institution. If you agree to this fee, press YES. If you wish to cancel this transaction, press NO." And they will be required to accept the fee before the machine will execute the transaction. This case involves those fees.[1]

Plaintiffs in three separate actions claim that the ATM access fee pricing requirements that Visa and MasterCard have imposed on banks and ATM operators violate Section 1 of the Sherman Antitrust Act. 15 U.S.C. § 1 (2006). Specifically, plaintiffs complain about contract provisions that prohibit ATM operators from charging fees for transactions processed over Visa and MasterCard networks that are higher than the lowest access fees charged for transactions processed over other payment networks. Plaintiffs claim that through these provisions, Visa and MasterCard suppress competition from other ATM networks, force ATM operators to charge consumers supra-competitive access fees, and harm competition in the market for ATM networks. Plaintiffs in National ATM Council v. Visa (" NAC " ), No. 1:11-cv-01803 (ABJ), and Stoumbos v. Visa, No. 1:11-cv-01882 (ABJ), claim that Visa and MasterCard conspired with unnamed banks to execute the scheme, while plaintiffs in Mackmin v. Visa, No. 1:11-cv-01831 (ABJ), have brought conspiracy claims against Bank of America, Wells Fargo, and J.P. Morgan Chase, as well as Visa and MasterCard.[2]

Defendants in all three cases have moved to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6).[3]

It is well-established that when considering a 12(b)(6) motion, the Court must accept the facts set out in the complaint as true. But the Court is not bound to assume the truth of a party's conclusions. In this case, the complaints bristle with indignation, but when one strips away the conclusory assertions and the inferences proffered without factual support, there is very little left to consider. The Court will therefore grant the motions to dismiss— without prejudice— on two grounds. First, the complaints allege insufficient facts to support the allegations that plaintiffs suffered any injury, and the law does not support their argument that such allegations are unnecessary in an antitrust case. Second, plaintiffs have not set forth sufficient facts to support their claim that there was a horizontal conspiracy. Notably absent from each of the complaints are facts

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showing the existence of an agreement, the essential element of any conspiracy. Given the insufficiency of the federal claims, the Court declines to consider the state law claims, and the complaints will be dismissed.


All three complaints raise the same general claim: that Visa and MasterCard include provisions in their contracts with banks and ATM operators that require ATM operators using the Visa or MasterCard ATM networks to set consumer access fees for transactions on those networks that are no higher than the lowest access fees charged for transactions processed over other ATM networks. NAC v. Visa First Am. Class Action Compl. (" NAC Compl." ) [Dkt. # 22] ¶¶ 41-43; Mackmin v. Visa First Am. Class Action Compl. (" Mackmin Compl." ) [Dkt. # 24] ¶¶ 69-70; Stoumbos v. Visa Corrected Class Action Compl. (" Stoumbos Compl." ) [Dkt. # 3] ¶¶ 31-32. Put another way, ATMs that accept Visa-or MasterCard-branded cards cannot charge consumers using those cards more for their transactions than they charge consumers whose transactions are processed on other ATM networks. Visa and MasterCard maintain that the provisions in question simply establish a ceiling on ATM access fees, which benefits all consumers. But plaintiffs characterize the provision as setting not a ceiling, but a floor: a level beneath which prices for transactions processed on other networks cannot be discounted. All three complaints assert that these access fee requirements injure competition in violation of Section 1 of the Sherman Antitrust Act.[4]

I. ATMs, Networks, and ATM Transactions

To understand the parties' claims and defenses, it is necessary to understand how ATMs operate and how funds flow in an ATM transaction. ATMs enable consumers to conduct banking transactions, such as withdrawing cash and obtaining account balances, without entering the bank. Stoumbos Compl. ¶¶ 4, 7. Consumers activate the ATMs with personal identification number (" PIN" )-based payment cards, issued by their banks or depository institutions, that link to their accounts.[5] NAC Compl. ¶¶ 35-37; Mackmin Compl. ¶¶ 48, 52; Stoumbos Compl. ¶¶ 6-7, 25.

ATMs can be owned and operated by banks or by independent operators. To process a consumer's ATM transaction, an ATM must access a network that can communicate with the consumer's bank to complete the transaction. Defendants Visa and MasterCard each operate ATM networks that transmit these communications, as do other networks, such as STAR, Pulse, NYCE Payment Network LLC, ACCEL/Exchange Network, Credit Union 24, CO-OP Financial Services, Shazam Inc., Jeanie, and TransFund. NAC

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Compl. ¶ 38; Mackmin Compl. ¶¶ 64, 66; Stoumbos Compl. ¶¶ 28-29.

The network used to process a particular transaction is determined by two factors: which networks the consumer's PIN card can access and which networks the ATM can access. Some PIN cards transmit transactions over a single payment network only, while others can send transactions over more than one network. NAC Compl. ¶ 38; Mackmin Compl. ¶ 66; Stoumbos Compl. ¶ 28. The reverse side of each card shows the service marks of the payment networks the card can access. NAC Compl. ¶ 38; Mackmin Compl. ¶ 66; Stoumbos Compl. ¶ 28. For example, a PIN card bearing the Visa, STAR, and NYCE service marks can only transmit ATM requests over the Visa, STAR, and NYCE networks, so that card can only be used on ATMs with access to those networks.

Whether an ATM can access a particular network depends on whether the ATM operator has a contract with the network provider. Banks that issue Visa-or MasterCard-branded PIN cards are automatically granted access to the Visa or MasterCard networks. Independent ATM operators who want their ATMs to have access to the Visa or MasterCard networks must be sponsored by a " sponsoring financial institution" — a Visa or MasterCard member bank— or must affiliate with a sponsored entity. NAC Compl. ¶ 39, Mackmin Compl. ¶ 64; Stoumbos Compl. ¶ 29. Both independent and bank-owned ATM operators typically contract with multiple networks so their ATMs can serve as many consumers as possible.

Consumers can access funds and conduct transactions using ATMs at their own bank, at other banks, and at non-bank locations, such as convenience stores, shopping malls, and airports. When a consumer uses an ATM to obtain cash from her account, the ATM sends the transaction request over a network and, if the requested funds are available, the ATM provides the cash to the consumer. Thanks to modern technology, all of this typically happens within a few seconds. When the consumer initiates the transaction on an ATM operated by an entity other than her own bank, that ATM's operator— whether a different bank or an independent operator— usually charges the consumer an ATM access fee for the transaction. NAC Compl. ¶ 37; Mackmin Compl. ¶¶ 2-3; Stoumbos Compl. ¶¶ 8, 27. These are the access fees at issue in the three lawsuits before the Court.[6]

II. The Parties

The three groups of plaintiffs represent different participants in ATM transactions. Plaintiffs in NAC v. Visa are the National ATM Council, a trade association that represents owners and operators of independent (i.e., non-bank owned) ATMs, along with thirteen owners and operators of independent ATMs. NAC Compl. ¶¶ 7, 9-21. Plaintiffs in Mackmin v. Visa are four consumers who have used ATMs, whether independent or bank-owned, and have paid ATM access fees as a result. Mackmin Compl. ¶¶ 12-15. Plaintiff in Stoumbos v. Visa is a consumer who has paid several ATM access fees specifically in connection with transactions at independent ATMs. Stoumbos Compl. ¶ 11.

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Defendants Visa and MasterCard are each independent, publicly-traded corporations that issue PIN cards under their respective brands and process ATM transactions on their networks. Visa operates the Visa, PLUS, and Interlink payment networks and issues PIN cards that carry its Visa, Visa Electron, Interlink, or PLUS service mark. MasterCard operates the MasterCard Worldwide Network and issues PIN cards that carry its MasterCard, Maestro, or Cirrus service mark. Before they became independent, publicly-traded corporations in 2008 and 2006, respectively, Visa and MasterCard were each associations owned and operated by member banks. NAC Compl. ¶¶ 30, 33-34; Mackmin Compl. ¶ ¶ 44-45, 50-51; Stoumbos Compl. ¶¶ 20, 25-26.

The Mackmin plaintiffs have also sued Bank of America, N.A.; NB Holdings Corp.; Bank of America Corp. (collectively, " Bank of America" ); Chase Bank USA, N.A.; JPMorgan Chase & Co.; and JPMorgan Chase Bank, N.A. (collectively, " Chase" ); and Wells Fargo & Co. and Wells Fargo Bank, N.A. (collectively, " Wells Fargo" ). These defendants are national retail banks that belong to the Visa and MasterCard networks. Mackmin Compl. ¶ 43.

III. Plaintiffs' Claims

Plaintiffs complain that Visa and MasterCard violate Section 1 of the Sherman Antitrust Act by including provisions in their agreements with banks and ATM operators that prohibit the operators from charging higher access fees for transactions over the Visa or MasterCard networks than they charge for transactions on any other network. NAC Compl. ¶¶ 41-42; Mackmin Compl. ¶¶ 69-70; Stoumbos Compl. ¶¶ 31-32. This means that an ATM operator cannot charge a consumer whose PIN card only operates on the MasterCard network a $2.00 ATM access fee on a particular ATM terminal, while charging a consumer whose PIN card operates on the NYCE network a $1.50 access fee on that same terminal.

According to all three complaints, these agreements harm competition. By preventing ATM operators from charging different ATM access fees to consumers based on the networks their PIN cards can access, plaintiffs say, these agreements effectively prohibit operators from discounting, rebating, or directing consumers to less expensive networks, NAC Compl. ¶¶ 44-45; Mackmin Compl. ¶¶ 74-75; Stoumbos Compl. ¶ 36. Thus, it is alleged that the agreements cause consumers to pay " supra-competitive" fees, that is, fees higher than a competitive market would bear, for ATM transactions, NAC Compl. ¶ 46; Mackmin Compl. ¶ 76; Stoumbos Compl. ¶ 39, and insulate Visa and MasterCard from the rigors of competition from other payment networks. NAC Compl. ¶ 43; Mackmin Compl. ¶ 80; Stoumbos Compl. ¶ 34. Plaintiffs claim that but for these contract clauses, price competition would ensue in the ATM transaction market, which would result in lower ATM access fees for consumers. NAC Compl. ¶ 47; Mackmin Compl. ¶ 76; Stoumbos Compl. ¶ 39. The NAC complaint, filed by independent ATM operators, also claims that the access fee rules enable Visa and MasterCard to " charge artificially high network fees for ATM transactions, to remit inadequate compensation to ATM operators, and to steer excessive and disproportionate compensation for ATM transactions to their member banks." NAC Compl. ¶ 46.

On January 30, 2012, Visa and MasterCard and the bank defendants filed motions to dismiss under Federal Rule of Civil Procedure 12(b)(6) on multiple grounds. The network defendants asserted

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that plaintiffs failed to allege sufficient facts to establish the existence of a conspiracy, an antitrust injury, or a violation of D.C. or state antitrust laws. Visa/MC Mot. at 9-24. The bank defendants asserted that plaintiffs have not pled facts to support the alleged per se violation of Section 1 of the Sherman Act, the allegation of a horizontal agreement, or an antitrust injury. Banks' Mot. at 8-22. Subsequently, in response to the Court's request, the parties provided supplemental briefing on the issue of injury in fact. See Defs.' Suppl. Br., NAC v. Visa [Dkt. # 29], Mackmin v. Visa [Dkt. # 51], Stoumbos v. Visa [Dkt. # 23]; Consumer Pls.' Suppl. Br., Mackmin v. Visa [Dkt. # 52], Stoumbos v. Visa [Dkt. # 24]; and NAC's Suppl. Br., NAC v. Visa [Dkt. # 30].


In evaluating a motion to dismiss under Rule 12(b)(6), the Court must " treat the complaint's factual allegations as true ... and must grant plaintiff ‘ the benefit of all inferences that can be derived from the facts alleged.’ " Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1113 (D.C.Cir.2000), quoting Schuler v. United States, 617 F.2d 605, 608 (D.C.Cir.1979) (citations omitted). Nevertheless, the Court need not accept inferences drawn by the plaintiff if those inferences are unsupported by facts alleged in the complaint, nor must the Court accept plaintiff's legal conclusions. Browning v. Clinton, 292 F.3d 235, 242 (D.C.Cir.2002).

" To survive a [Rule 12(b)(6) ] motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal quotation marks omitted); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (applying this standard in an antitrust case in which the allegations of conspiracy were found to be insufficient because the plaintiffs had not set forth enough facts to state a plausible claim on its face). A claim is facially plausible when the pleaded factual content " allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. " The plausibility standard is not akin to a ‘ probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. " [W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged— but it has not show[n]— that the pleader is entitled to relief." Id. at 679, 129 S.Ct. 1937, quoting Fed.R.Civ.P. 8(a)(2) (second alteration in original) (internal quotation marks omitted). A pleading must offer more than " labels and conclusions" or a " formulaic recitation of the elements of a cause of action," id. at 678, 129 S.Ct. 1937, quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955, and " the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions," id.


I. The Sherman Antitrust Act

Plaintiffs allege a violation of Section 1 of the Sherman Antitrust Act. Section 1 declares illegal " [e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce." 15 U.S.C. § 1 (2006). Thus, a violation involves two ...

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