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In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation

August 27, 2010


The opinion of the court was delivered by: John Gleeson, District Judge


This opinion resolves a discovery dispute over two documents created in connection with the European Commission's investigations into the defendants' conduct. The Commission, appearing as amicus curiae, asserts that the documents are confidential under European law and that this Court should deny the plaintiffs access to them pursuant to the doctrine of international comity. Magistrate Judge James Orenstein granted the plaintiffs' motion to compel discovery of the documents. Defendants Visa and MasterCard, supported by the Commission, object to that ruling. For the reasons stated below, I conclude that the order appealed from is contrary to the law of international comity, which mandates an exception in this instance to the usual rule that all relevant information is discoverable. Accordingly, the motion to compel is denied.


A. This Litigation

Prior decisions provide more detail on the background to this case*fn1 ; a brief introduction suffices for present purposes. The plaintiffs are merchants in the United States who accept Visa and MasterCard payment cards.*fn2 They charge that the defendants -- Visa, MasterCard, and various American banks -- have violated and continue to violate the United States antitrust laws by unlawfully inflating the fees merchants pay on Visa and MasterCard transactions.

Visa and MasterCard are membership corporations comprised of thousands of banks. In any given consumer payment-card transaction, a bank assumes the role of "Issuing Bank" or "Acquiring Bank." The Issuing Bank issues a payment card bearing the Visa or MasterCard name; a consumer then uses the card to pay a merchant for goods or services. The merchant holds an account with the Acquiring Bank. The amount debited from the consumer's account with the Issuing Bank is reduced by various fees before it arrives in the merchant's account with the Acquiring Bank. Chief among these fees is the interchange fee, which the Issuing Bank keeps for itself as compensation for its role in the transaction.

The interchange fee is calculated using rules set by the Visa and MasterCard Boards of Directors. Several banks are represented on one Board or the other, and some are represented on both. According to the plaintiffs, the defendants are violating section 1 of the Sherman Act of 1890, 15 U.S.C. § 1, by conspiring to fix the interchange rate, by adopting and enforcing anticompetitive restraints of trade, and by engaging in illegal tying and bundling. In addition, the plaintiffs allege that Visa and MasterCard have monopolized the market for payment card transactions, thereby violating section 2 of the Sherman Act, 15 U.S.C. § 2. The plaintiffs, who seek damages and injunctive relief, filed various complaints in several district courts in 2005. Those actions were consolidated and transferred to me by the Judicial Panel on Multidistrict Litigation. In re Payment Interchange Fee and Merchant Discount Antitrust Litig., 398 F. Supp. 2d 1356 (J.P.M.L. 2005).

B. The European Investigation and the Contested Documents

Visa and MasterCard are worldwide networks, and their practices have come under scrutiny from regulatory agencies outside the United States.*fn3 Since 1999, Visa and MasterCard's activities in the member states of the European Union ("EU") have been the subject of an investigation by the European Commission. As explained below, the documents whose production plaintiffs seek to compel arise from the European investigation.

1. The European Commission's Antitrust-Enforcement Procedures

The European Commission is the EU's executive and administrative branch. Through its antitrust enforcement agency, the Directorate-General for Competition, the Commission investigates possible breaches of European competition law. The Commission has the power to search business premises and the homes of executives, and it can seize documents and other evidence. In addition, the Commission can compel investigated parties to provide information, and may also collect information from third parties.

The Commission has the power to impose fines and remedial measures where it finds that European antitrust law has been violated.*fn4 But before making a final decision, the Commission gives the targets of its investigation notice and an opportunity to be heard. The Commission provides the targets with a Statement of Objections, which outlines the Commission's preliminary views and informs the targets of its intended findings. The Statement of Objections is not made public. A party served with a Statement of Objections is given time to submit a written reply. Like the Statement of Objections, a party's reply is confidential; even the other parties to the investigation are generally precluded from seeing it.

A target served with a Statement of Objections may also elect to be heard by the Commission at an Oral Hearing. An Oral Hearing takes place before a Hearing Officer, and is attended by the parties, representatives of the Commission, representatives of competition authorities of member states, and third parties who have established a sufficient interest in the proceedings. The Oral Hearing is confidential. The Hearing is recorded, and the Commission provides a copy of the recording to any party who requests one.

2. The European Commission's Investigations of Visa and MasterCard

The European investigation of Visa and MasterCard concerns, among other things, the networks' rules and practices for setting interchange fees in the EU's member states. Visa reached a settlement with the Commission in the early stages of the investigation. As part of the settlement agreement reached in 2002, Visa received a five-year exemption from antitrust scrutiny in exchange for a promise to cap its cross-border interchange fees at agreed levels. MasterCard, however, decided to contest the allegations.

a. The MasterCard Oral Hearing

The Commission served Statements of Objections on MasterCard in 1999, 2003 and 2006. After receiving the third Statement of Objections, MasterCard exercised its right to an Oral Hearing, which took place on November 14 and 15, 2006. The Oral Hearing was attended by ten interested third parties. MasterCard requested and received a recording of the Hearing.

On December 19, 2007, the Commission issued a 241-page decision concluding that MasterCard had violated European competition law. A partially redacted version of this decision is publicly available. See Non-Confidential Version, Commission Decision of Dec. 19, 2007, COMP/34.579 MasterCard, COMP/36.518 EuroCommerce, COMP/38.38.580 Commercial Cards. The Commission found that MasterCard's multilateral interchange fee "restrict[ed] competition between acquiring banks by inflating the base on which acquiring banks set charges to merchants and thereby setting a floor under the merchant fee." Id. ¶ 2. Moreover, the Commission rejected MasterCard's attempts to justify these restrictions on competition.

Id. ¶¶ 5-12. In light of these findings, the Commission determined that MasterCard had violated Article 81*fn5 of the European Community Treaty (Europe's analog to section 1 of the Sherman Act), ...

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