The state of Arizona sued Visa and MasterCard last week for allegedly fixing prices and restricting trade, which is a violation of federal antitrust laws.
Arizona Attorney General Mark Brnovich sued the credit card companies on Feb. 19 alleging retail businesses are restrained from competing for banks' credit and debit cards.
Banks earn income through interchange fees paid by businesses when customers use one of the bank credit or debit cards. Visa and MasterCard are used in a majority of the banks and financial institutions in the country.
The interchange fee is set by Visa and MasterCard, and is usually a percentage of the transaction price, the lawsuit said. Businesses usually pass the costs on to the customer through higher retail prices.
Businesses are allegedly charged higher interchange fees for what are known as “premium cards,” which offer the highest rewards when customers use them. Merchants cannot refuse to accept premium cards.
Brnovich said Visa and MasterCard have nearly identical rules that banks agree to impose on businesses. The competitive restraints allegedly eliminate competition for businesses to accept other credit or debit cards.
The suit alleged that the restraints set default interchange fees and prevent businesses from fostering competition among the issuing banks.
Brnovich alleged the state of Arizona has also been damaged due to paying higher costs to accept credit and debit cards from both Visa and MasterCard.
Brnovich is seeking to eliminate the enforcement of the competitive restraints and an unspecified amount of damages.
United States District Court District of Arizona case number 2:15-cv-00309.