Visa and MasterCard Battle Price-Fixing Litigations

November 7th, 2011 by Trefis Team
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Visa (NYSE:V) and MasterCard (NYSE:MA) were accused of price fixing by a trade group representing operators of automated teller machines. Visa and MasterCard require ATM operators to levy a service fee for any transaction at an ATM that is no less than the amount charged at that ATM for a Visa or MasterCard transaction even for transactions that don’t use the companies’ networks. [1]

In February this year, Visa and MasterCard were sued by merchants over swipe fees and the two company have put any potential settlement of price-fixing litigation by merchants at about $4 billion. [2] If there is a negotiated settlement with all plaintiffs, MasterCard estimates its possible loss at $500 million.

According to MasterCard, it is not possible to put an upper limit on this loss due to the significantly higher demand by the class plaintiffs, which are not acceptable to the company. Visa and MasterCard argued that they can’t be accused of a conspiracy because the merchants don’t directly pay the interchange fees on payment-card purchases.

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We have a price estimate of $90 on Visa, about the same as the current market price. We have a $350 estimate for MasterCard, which is slightly below the market price.

See our full analysis of Visa here | See our full analysis of MasterCard here

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Notes:
  1. Visa, MasterCard Accused of Price Fixing by ATM Operators, Bloomberg, Oct 13 2011 [↩]
  2. Visa, MasterCard Estimate Potential Fee Settlement at $4 Billion, Bloomberg, Nov 3, 2011 [↩]