Visa and MasterCard are Breaking Antitrust Laws by Using Square to Collect Fees From Small Businesses
According to a recent class action lawsuit, credit card giants Visa and MasterCard are stifling competition by charging small businesses using the Square payment network with unreasonably high fees.
About Square, Inc.
Square is similar to any gadget or service that allows you to pay using your credit or debit card. It is like the devices at the mall or grocery store checkout counters; or the form on an e-commerce platform where you enter your card information.
The main difference, and what made Square a $32 billion business, is that it made accepting cards much cheaper and simpler for merchants than the conventional method of physically going to a bank branch.
In principle, Square Cash, one of Square’s many products, allows merchants to accept purchases from customers without relying on Visa or MasterCard. To put it another way, it is not a cog but its own rig.
Hayley Lanning, SBG Designs LLC, Dell Fox Jewelry, and CryoServices, Inc. filed the class action lawsuit in New York on April 28.
The group claimed that due to antitrust breaches and false advertising, Visa and MasterCard caused them and their companies to lose money and property.
The claim was made on behalf of those using Square to receive payments in:
- North Carolina
- North Dakota
- New Hampshire
- New Mexico
- New York
- Rhode Island
- South Dakota
- West Virginia
Such states permit indirect buyers to file class action litigation against parties from whom they have purchased products or services.
In this case, Square is the direct buyer of Visa and MasterCard merchant discount payments, payable on any Visa or MasterCard transaction.
These costs include an exchange fee – set by the banks – and other smaller fees for the network. The class action lawsuit states that the “Interchange Fee” results from horizontal price-fixing deals between card-issuing banks comprising the Visa and MasterCard networks.
In addition, the Interchange Fee is purely a toll that the credit card issuing banks agreed to levy on each credit card transaction in a joint exercise of monopoly control.
But mostly, Square passes those charges on to companies using its network, which it calls transaction fees.
According to the class action lawsuit, transaction rates are set high enough to offset the merchant discount fees and other expenses that Square is incurring.
Hayley Lanning, SBG Designs LLC, Dell Fox Jewelry, and CryoServices, Inc. use Square to accept all large credit and debit card purchases.
The Class Action Lawsuit
In addition to the “price-fixed” fees, the class action lawsuit claims that the credit card companies’ use of the “No-Surcharge Rule,” — which prohibits retailers from enforcing a rate — has shielded the defendants from the competition and stifled the market.
The class action lawsuit claims that they conspired as a cartel to place a nonnegotiable deadweight toll on any credit card transaction.
Hayley Lanning, SBG Designs LLC, Dell Fox Jewelry, and CryoServices, Inc. are suing for antitrust and business law violations in different jurisdictions and seek class registration, injunctive relief, damages, interest, compensation, and a jury trial.
Editor’s Note on Visa & MasterCard Antitrust Lawsuit:
This article is published to inform you of the latest class action lawsuit filed against Visa and Mastercard for allegedly charging small businesses with high fees.
Case Name & No.: Hayley Lanning, et al. v. Visa Inc., et al., Case No. 1:21-cv-02360, in the U.S. District Court Eastern District of New York
Products/Services: Visa and Mastercard’s fixed-rate on card fees
Allegations: Visa and Mastercard are allegedly enforcing a higher rate by using Square payments
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