In a supplemental brief filed with the court today, MasterCard asked Judge John Gleeson to dismiss the Wal-Mart antitrust litigation prior to trial, on the basis that the retailers' claims are legally and factually deficient, and do not merit being presented to a jury. The papers filed by MasterCard update the Court with the most recent evidence of vigorous competition in the payments industry. They also leave no doubt that MasterCard's Honor All Cards practice should be upheld because it is good for competition. It gives American consumers the broadest choice of payment options in the world, and helps the economy by facilitating billions of transactions each year between American consumers and retailers.
Noah Hanft, MasterCard general counsel, said: "The retailers' groundless claims are based on the notion that MasterCard has somehow stunted the development of online debit utilizing a PIN number in the U.S. The absurdity of that argument is self-evident when one simply considers the undisputed fact that PIN debit - including STAR, NYCE, PULSE and other PIN debit networks - has grown enormously over the last decade."
The use of PIN debit has continued to skyrocket in the last two years, outpacing the growth of signature debit. The number of PIN pads in U.S. stores has grown by more than 30% each of the last two years, and the number of times consumers used PIN debit grew by 32% from 2000 to 2001, and by 39% from 2001 to 2002. Since 1991, the number of purchases using PIN debit has grown by almost 2000%. The STAR network alone handles 20% of all debit sales. Together, the STAR, PULSE and the other PIN debit networks handle more than 40% of debit card sales. "Therefore, it can hardly be denied that in the U.S., PIN debit is a formidable competitive force and is thriving," Hanft said.
MasterCard's filing also shows that the retailers' claim that MasterCard has "conspired" with rival Visa to stifle competition from PIN debit networks has no basis. To the contrary, as Judge Barbara Jones found in the recent Department of Justice litigation, MasterCard and Visa have long engaged in "vigorous competition" with one another.
"The retailers' case is at odds with both the law and the reality of how consumers pay for goods and services at stores like Wal-Mart, Hanft said. "Wal-Mart's customers can choose to pay using any of the wide range of payment options Wal-Mart accepts, including cash, checks, MasterCard and PIN debit.
No MasterCard rule stops Wal-Mart from suggesting - as it routinely does - that customers pay with PIN debit. Given these undisputed facts, Wal-Mart and other retailers have no basis to claim that MasterCard has somehow impaired their ability to accept or promote their preferred forms of payment. But in the end, it is the American consumer that should ultimately decide how to pay, not Wal-Mart or any other retailer. For this reason as well, this case is simply without merit and should be dismissed now."
Finally, MasterCard has asked the Court to throw out the retailers' request for billions of dollars in damages, "because it is spun from thin air, and not based on any facts, let alone marketplace reality," according to Hanft. "Wal-Mart and other retailers, who have made billions of dollars in sales on MasterCard debit and credit cards, now claim that accepting those cards cost them billions of dollars. Of course, what the retailers behind the lawsuit want is to continue reaping huge profits from accepting MasterCard cards, while shifting their cost of accepting those cards to the American consumer."
That goal was best summed up by a Payless Shoe Source executive, who testified under oath that Payless "would rather have the consumer carry the cost [of debit transactions] than us." Another retailer, who recently asked to be excluded from this lawsuit, explained the plaintiffs' true motive as nothing more than the retailers' "greed and arrogance."
Hanft said that, "the merchants are trying to take away from their customers, and secure for themselves, the ability to choose which payment option cardholders can use. American antitrust laws, which are designed to protect consumers, encourage practices like MasterCard's Honor All Cards rule, which creates a greater range of choice for consumers and protects their freedom of choice. For these reasons, this groundless lawsuit should be dismissed."