MasterCard 2013 Annual Report Download - page 98

MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
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tying arrangement in violation of Section 1 of the Sherman Act. In June 2003, MasterCard International signed a
settlement agreement to settle the claims brought by the plaintiffs in this matter, which the Court approved in December
2003. Pursuant to the settlement, MasterCard agreed, among other things, to create two separate “Honor All Cards”
rules in the United States - one for debit cards and one for credit cards.
In addition, individual or multiple complaints have been brought in 19 states and the District of Columbia alleging state
unfair competition, consumer protection and common law claims against MasterCard International (and Visa) on behalf
of putative classes of consumers. The claims in these actions largely mirror the allegations made in the U.S. merchant
lawsuit and assert that merchants, faced with excessive interchange fees, have passed these overhead charges to
consumers in the form of higher prices on goods and services sold. MasterCard has successfully resolved the cases in
all of the jurisdictions except California, where there continues to be outstanding cases. As discussed above under
“Department of Justice Antitrust Litigation and Related Private Litigations,” in September 2009, the parties to the
California state court actions executed a settlement agreement subject to approval by the California state court. In
August 2010, the court granted final approval of the settlement, subsequent to which MasterCard made a payment of
$6 million required by the settlement agreement. As noted above in more detail, the plaintiff from the Attridge action
and three other objectors have filed appeals of the trial court’s final approval in April 2013 of a revised settlement.
ATM Non-Discrimination Rule Surcharge Complaints
In October 2011, a trade association of independent Automated Teller Machine (“ATM”) operators and 13 independent
ATM operators filed a complaint styled as a class action lawsuit in the U.S. District Court for the District of Columbia
against both MasterCard and Visa (the “ATM Operators Complaint”). Plaintiffs seek to represent a class of non-bank
operators of ATM terminals that operate ATM terminals in the United States with the discretion to determine the price
of the ATM access fee for the terminals they operate. Plaintiffs allege that MasterCard and Visa have violated Section
1 of the Sherman Act by imposing rules that require ATM operators to charge non-discriminatory ATM surcharges for
transactions processed over MasterCard’s and Visa’s respective networks that are not greater than the surcharge for
transactions over other networks accepted at the same ATM. Plaintiffs seek both injunctive and monetary relief equal
to treble the damages they claim to have sustained as a result of the alleged violations and their costs of suit, including
attorneys’ fees. Plaintiffs have not quantified their damages although they allege that they expect damages to be in the
tens of millions of dollars.
Subsequently, multiple related complaints were filed in the U.S. District Court for the District of Columbia alleging
both federal antitrust and multiple state unfair competition, consumer protection and common law claims against
MasterCard and Visa on behalf of putative classes of users of ATM services (the “ATM Consumer Complaints”). The
claims in these actions largely mirror the allegations made in the ATM Operators Complaint described above, although
these complaints seek damages on behalf of consumers of ATM services who pay allegedly inflated ATM fees at both
bank and non-bank ATM operators as a result of the defendants’ ATM rules. Plaintiffs seek both injunctive and monetary
relief equal to treble the damages they claim to have sustained as a result of the alleged violations and their costs of
suit, including attorneys’ fees. Plaintiffs have not quantified their damages although they allege that they expect damages
to be in the tens of millions of dollars.
In January 2012, the plaintiffs in the ATM Operators Complaint and the ATM Consumer Complaints filed amended
class action complaints that largely mirror their prior complaints. MasterCard moved to dismiss the complaints for
failure to state a claim. In February 2013, the district court granted MasterCard's motion to dismiss the complaints.
The plaintiffs’ motion seeking approval to amend their complaints was denied by the district court in December 2013.
The plaintiffs have appealed the dismissal of both their complaints and their motion to amend their complaints.
Interchange Litigation and Regulatory Proceedings
Interchange fees represent a sharing of payment system costs among the financial institutions participating in a four-
party payment card system such as MasterCard’s. Typically, interchange fees are paid by the acquirer to the issuer in
connection with purchase transactions initiated with the payment system's cards. These fees reimburse the issuer for
a portion of the costs incurred by it in providing services which are of benefit to all participants in the system, including