Thursday, July 01, 2010

Market Adequately Alleged in ATM Network Price Fixing Case

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The federal district court in San Francisco has refused to dismiss antitrust claims against members of the Star ATM Network—“the largest ATM Network in the United States”—on the ground that complaining customers failed to allege a legally adequate “relevant market.”

The customers' “all ATM Networks” market was both legally cognizable and adequately pled. Therefore, the complaint was sufficient to survive the pleadings stage.

The customers alleged that banks conspired to fix interchange fees in the Star ATM network for “foreign ATM transactions.” The dispute involved the alleged fixing of fees that one member of the Star ATM network charged another member when the customer of the second member used an ATM owned by the first.

“All ATM Networks”

The complaining customers plausibly alleged that Star and network members possessed market power in an “all ATM Networks” relevant market, the court ruled. Further, the plaintiffs alleged that the defendants set interchange fees at a level that was well above their costs and maintained the supracompetitive prices (and the resulting profits) for many years.

A prolonged period of substantially-above-cost pricing provided a strong indication that the defendants and Star possessed market power in the ATM networks market, in the court's view. Although the complaining customers did not expressly allege that the defendants’ conduct had an affect on marketwide prices and output in the all ATM networks market, that conclusion could be reasonably inferred from their allegations.

Single-Brand Market

The court rejected the plaintiffs’ alternative, narrower product market, which was limited to a single-brand, derivative market for “Star Network” foreign ATM transactions. This was not one of the “extremely rare” instances in which a valid single-brand market existed, the court noted.

Under the plaintiffs’ theory, the market for demand deposit accounts was a “foremarket” that gave rise to a “derivative aftermarket” consisting of foreign ATM transactions that were routed over the network that the customer’s new bank had chosen. Further, customers were allegedly economically locked into their chosen bank and locked into their bank’s choice of foreign ATM network providers—the Star Network.

According to the court, the market for demand deposit accounts and the market for ATM network services involved two different sets of consumers. Individuals, businesses, and others purchased deposit accounts; banks purchased ATM network services. The market for Star’s services, as well as the market for ATM networks generally, was not a derivative aftermarket of the market for demand deposit accounts.

The decision is In re ATM Fee Antitrust Litigation, 2010-1 Trade Cases ¶77,066.

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