Metropolitan News-Enterprise


Friday, July 13, 2012


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Ninth Circuit Panel Tosses Antitrust Claim Over ATM Fees




The Ninth U.S. Circuit Court of Appeals yesterday tossed out a lawsuit claiming that banks illegally conspired to fix the fees non-customers are charged to get cash from ATMs.

Consumers lack standing to challenge the fees under federal antitrust laws because they do not pay the fees directly, and the narrow exceptions that sometimes allow indirect purchasers to sue do not apply, Judge N. Randy Smith wrote for the panel.

The plaintiffs sued Bank of America Corp., Wells Fargo & Co., and others whom they said colluded to set the so-called “interchange fees” that banks charge each other for “foreign” ATM transactions—those using a card issued by one bank at another’s ATM.  The interchange fee is paid by the bank that issues the card, in an amount set by the ATM network; it is separate from the “foreign ATM fee” paid by the consumer to his or her own bank.

STAR Network

The complaint, filed in 2004, challenged fees paid to the STAR network. STAR was owned by its member banks until February 2001, when it was acquired by Concord EFS, Inc., which was later acquired by First Data Corporation.

The customers alleged that banks artificially inflated the fee for using a foreign ATM when they passed along the charge to customers.

U.S. District Judge Charles Breyer of the Northern District of California granted the defendants’ motion for summary judgment based on lack of antitrust standing.

Smith, writing for a panel that also included Judge Consuelo Callahan and visiting Tenth Circuit Judge Carlos Lucero, noted that under the Clayton Act, antitrust standing extends only to a person “injured in his business or property by reason of anything forbidden in the antitrust laws.” The provision, Smith added, has been narrowly interpreted by the courts.

 A direct purchaser, the judge explained, suffers the requisite injury, even if it recoups the alleged overcharges by passing them on to its customers. But an indirect purchaser cannot use a pass-on theory to claim actual injury, he said, citing Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977).

Few Exceptions

A handful of exceptions to the Illinois Brick rule have been recognized, Smith noted, so that an indirect purchaser may sue when a preexisting cost-plus contract with the direct purchaser exists, when the defendants have conspired to fix the prices paid by the plaintiffs, or when customers of the direct purchaser own or control the direct purchaser.

In this case, the appellate jurist explained, while the plaintiffs claimed they paid an “illegally fixed fee,” the interchange fee was not paid by them, nor did they allege that the defendants conspired to fix the fees that cardholders do pay. As a result, Smith said, the plaintiffs lacked standing either as direct purchasers or under the co-conspirator exception.

No Control

The judge also rejected the argument that the “ownership or control” exception applied.

The banks, he said, did not own STAR after Concord acquired it, nor did they “control” it, in the plain sense of the word.

The banks, he noted, only owned 10 percent of Concord when it acquired STAR, and their agreement with STAR was negotiated and gave STAR the power to change the fees based on market conditions.

Smith acknowledged that the banks retained a degree of influence over the network, because the agreement prohibits arbitrary changes in the fee structure and creates an advisory board on which the banks are represented. But that influence “does not constitute the type of control necessary to meet the exception to Illinois Brick,” he wrote, because final decisionmaking remains in the hands of the corporation’s board.

The case is In re ATM Fee Antitrust Litigation, 10-17354.


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