Intuit set to sue Visa and Mastercard over interchange fees

Intuit, a US business and financial software company that develops and sells financial, accounting, and tax preparation software is reported to be suing Mastercard and Visa for fixing interchange fees paid by merchants and payment processors that accept card payments.

According to the Intuit submission in a US federal court, Visa, Mastercard and their member banks use anti-competitive agreements to limit competition and fix the so-called interchange fees in a market in which they are the dominant players.

Intuit, whose brands include tax filing software TurboTax and accounting platform QuickBooks, alleged a combined 18 counts of federal and state antitrust violations and violations of California’s business and professions code.

“Visa, Mastercard and their member banks have unlawfully fixed at high levels the so-called ‘interchange’ fees that merchants, independent sales organizations … and payment facilitators … must pay for a debit or credit card transaction,” the complaint said.

Intuit said it is affected by the alleged behaviour because as a payment facilitator, it has to pay higher prices for credit and debit transactions over Visa and Mastercard’s networks.

According to the complaint, both companies use a rule called “Honor All Cards,” in which merchants and others that accept any credit or debit cards must accept all cards within each network, eliminating any pressure to lower interchange fees in order to compete.

The rule is enforced by monitoring transactions to ensure member banks don’t offer lower fees, and violations can result in fines or expulsion from Visa or Mastercard’s networks, the filing said. Intuit portrayed banks as “willing participants,” who allow Visa and Mastercard to act as “cartel managers” to keep down competition over card issuance.

Intuit also accused the companies of using faulty technology that’s susceptible to fraud. Visa and Mastercard have resisted allowing the use of personal identification numbers for credit cards, since PIN networks are able to compete on pricing, the complaint said.

In the case of debit cards, the two companies have installed themselves as the only PIN option, allowing them to continue charging higher interchange fees, the complaint said.

“As a result of their conduct … United States businesses were subject to the highest payment card related fees in the world, and United States consumers experienced the highest rates of payment card fraud in the world,” the complaint said.

Britain’s highest court in December cleared the way for a £14 billion ($18.5 billion) proposed consumer lawsuit against Mastercard over its merchant swipe fees to proceed as a class action.

Intuit is seeking triple damages plus interest for alleged anti-competitive behaviour dating back to August 2004. It’s also seeking attorney fees and lawsuit costs.