CANADA ) )

Q.B. ___ o[2012 PROVINCE OF SASKATCHEWAN

CANADA RENT A (2000) Plaintiff

OF AMERJCA CORPORATION, BMO FINANCIAL GROUP, BANK OF NOVA SCOTIA, CANADLAN IMPERIAL BANK COMMERCE,

CAPITAL FINANCIAL CORPORATION, ClTIGROUP FEDERATION DESJARDINS DU QUEBEC,

MASTERCARD INTERNATIONAL INCORPORATED, NATIONAL CANADA INC., ROYAL OF CANADA, TORONTO-DOMINION BANK, and VISA CANADA CORPORATION

Brought under Actions

NOTICE TO DEFENDANT

Defendants

I. The plaintiff may enter judgment in accordance with {his Statement of Claim Or such judgment as may be granted pursuant to the Rules unless

• within 20 if you were served in Saskatchewan; • within 30 if you were served elsewhere in Canada or in the United Stales of America; • within 40 days if you were served Canada and the United States of America

the day you serve a Sfatement of Defence on the plaintiff and file a copy thereof in the local registrar of the Court for the judicial centre above named.

2. In many cases a defendant may have the trial of the aclion held at a judicial centre other than the one at which the Statement of Claim is issued. defendant should consult his as to his rights.

3. This Statement of Claim is to be served within six months from the dale on which it is issued.

4. This Statement of Claim is al the above-named judicial centre the 12th day of July, 2012.

(LS) Local Registrar

The

I.

and

2.

CLAIM

plainti ff, Canada Rent A (2000) Ltd. ("Plaintiff') is a corporation incorporated

cards

credit proposed Class 17

defendant, Bank of Corporation ("MBNA") is a publicly traded corporation

pursuant to the laws of the State of Delaware, United States of America, business

In as MBNA Bank During the Class MBNA issued MasterCard-branded

throughout including in Saskatchewan.

3. defendant, BMO Financial Group ("BMO") is a chartered bank pursuant

to Bank Act, S. C. J 991, c. 46 ("Bank Act"). the Class Period, BMO issued

MasterCard-branded credit throughout Canada, including in Saskatchewan. the Class

Moneris

below).

BMO was, along with Royal Bank of one ofthejoint investors

("Moncris"), a Acquirer in Canada defined in paragraph

4. defendant, of Nova Scotia ("Scotiabank") is a chartered bank incorporated

pursuant to the Bank Act. the Class Period. issued Visa-branded credit cards

Canada, including in Saskatchewan.

5. defendant, Imperial Bank of n""rIPH'rl bank

"'"",,",r,,,1"<>rl pursuant to the Bank During the and

MasterCard-branded credit tlu:oughout Canada,

(HCIBC") is a

Period. CIBC issued both

in Saskatchewan.

6. defendant, Capital Financial Corporation (,'Capital Oneil) is a publicly traded

incorporated pursuant to the laws of the of Delaware, United of America.

the Class Period, Capital issued MasterCard-branded credit cards throughout Canada,

State

branded

United States of

traded corporation

Class Period,

throughout Canada, including Saskatchewan.

ofthe

8. The defendant, Federation des catsses Desjardins du Quebec ("Desjardins") is an

organizati on IH/f'r<:f·p the Desjardin Group including its caisses populaires credit unions.

During the Period, Desjardins Visa-branded credit cards throughout ~~.,~~~, including

In During the Class owned and one the leading

9. rlAi-....... rI''''''f MasterCard International t"lf"f'rrI,r\r::lfPf1 ("MasterCard") is ""''''''''''.>/'1 under

the laws of Delaware, United of America, and is a of MasterCard

Incorporated, a publicly traded corporation incorporated pursuant to laws of the State of

Delaware, United States of America. the Class Period, MasterCard the MasterCard

credit card network throughout Canada, including in Saskatchewan.

10.

to

throughout

II.

During

including in ~a:Sl<a,tcrle""an

("National") is a

National issued

defendant, Royal Bank of ~ .. "' ... ~"" ("RBC") is a chartered

incorporated

credit

incorporated pursuant

to the BankAct, During the Class Period, issued MasterCard-branded credit cards thTOUghout

in Saskatchewan,

behind Moneris.

Class Period, RBC was, with BMO, one of

12, defendant, Toronto-Dominion ("TD") is a ::1",,''1'',01'1 bank incorporated

to Bank Act. During the issued Visa-branded cards throughout

Saskatchewan.

-3-

13. The defendant, Visa Canada Corporation ("VisaH) is a Nova Scotia incorporated company

and is a subsidiary of Visa Inc.

throughout Canada, including

14. BMO,

and TD are known as

Class Period, Visa the Visa credit card

"Defendant Banks".

PARTICULARS OF THE CLAIM

The

l5. Plaintiffbrings this

Visa Class

pursuant to The

MasterCard

and I having suffered loss in common with other

Members.

l6. Plaintiffis incorporated pursuant to the laws

operations in

to consumers.

Saskatchewan, renting Water

Act, on its own behalf, and on

as defined in

Members and

having head

and offering related

17

and

and

17. Plaintiff accepted payments by Visa credit cards and MasterCard credit cards during the

18. Plaintiff was rates for accepting credit card and MasterCard credit

and charged additional rates when such were part of a or loyally

The

19. This action is brought on behalf of merchants of the Plaintiff all Canadian

persons who, duri ng period commencing at least as early as 2001, continuing

to the present ("Class Period "), accepted payments for the supply of goods and services

credit to terms ("Visa Class Members"),

-4-

or such class definition or period as may ultimately ""tv .... ·'u'"' on the motion for

certification.

20. action is brought on behalf of consisting Plaintiff and all Canadian

who, during the "'''''''.1-', .... '-' payments for suppJy of

servIces by way MasterCard cards pursuant to the terms of agreements

("MasterCard Members") or such class definition or class period as Court may

ultimately "' ......... '.v ..... on the motion for certification.

The Defendants

21. The defendants MasterCard the two card networks Canada,

including in Saskatchewan. Visa had approximately 3 i million credits cards in circulation

and MasterCard had approximately 44 million. In 2009) approximately merchants across

,,","''''''''"''''' accepted Visa or MasterCard cards. Tn 2009, credit market had $265

bilJion in purchase Visa's these transactions was approximately 60% and

MasterCard's approximately 30%.

credit card network involves contracts with:

issuing banks that are authorized by the defendants to issue credit cards to consumers

bearing the trademarks andior MasterCard ("Issuing Banks"); and,

b) acquiring financial

C'Acquirers").

that function as payment processors to merchants

The Banks are all Issuing Banks.

Credit Card Manipulation

24. card is characterized contractual amongst and between

Visa, its Issuing and the Acquirers, and amongst and between MasterCard, its Issuing LJ'UU'l.il>

and Acquirers, each credit network market in the market for credit

card network services.

agreements

networks constitute two

contractual relationships ""1"'\"''''''''''' the Visa and 'vIa:' ...... credit card

of contracts which but interrelated operational agreements by

are

(b)

and among:

the

and

and its member

the MasterCard network and its

Acquirers).

(which are Issuing Acquirers);

banks (which are Issuing Banks and

26. In essence, the and MasterCard networks are organizations that facilitate credit and debit

They do so setting standards for exchange of data and funds

merchants, and networks also authorization,

and settlement for all Visa- and MasterCard-branded payment transactions.

Certain Issuing

in both credit

as the defendants

networks. Certain

Desjardins, and and all Acquirers

Banks, including the defendants BMO,

In order to accept by Visa or credit cards, must enter into

with Acquirers. agreements include standard terms and imposed by the

Banks and Visa and MasterCard through their respective agreements with the Acquirers.

agreements include terms of the Visa Operating (UVisa Rules"),

MasterCard MasterCard ("MasterCard Rules").

Every time a customer uses a V isa or credit card to a merchant for a good

or that merchant must pay a fee, commonly referred to as a "Merchant Discount Fee".

Merchant Discount Fee is calculated as a of the sale price ofthe good Or service supplied.

Merchant Discount is the difference the price a merchant charges for a good or

amount IS to 2009, merchants in

paid approximately billion in Merchant Discount

-6-

30. The Merchant is divided into three parts: the to

fssuing Bank associated with customer's particular Visa or MasterCard credit the "Service

Fee" retained by the the "Network Fee" paid to either or . The

Interchange Fee is typically 80% the Merchant Discount Fee.

31. Through lAl"fr·p.p,r'n

an unlawfully created and

that leverages

merchants.

32. During the

default minimum

Banks within their "p(!npl~T

Issuing Banks and Acquirers,

H_""~~ duopoly in the Canadian credit card network

to impose upon merchants rules In

the and MasterCard networks set

calculation of Interchange

credit card networks. These minimum rates set a

constitute

market

loss to

available

Issuing

that applied

to the vast majority

but regardless ofthe

Canadian consumers

Defendants of

benefitting by about

.,..,..n,,,,,,,,, transactions within the Visa and networks,

33. Interchange

instance,

the No Surcharge Rule increases costs and

Visa and MasterCard users have the apparition by the

from Loyalty Programs or free credit cards and reality they are

of purchases while paying about 5% more for

are structured to impose different rates on

on store and gas station transactions are

For

than interchange

to price fees on most

discriminate manner.

34. By "'A,,',,"""'" to the Visa Rules and the

MasterCard network

on the terms upon which

or arrangements that

supply credit card network

merchant agreements (the "Merchant Restraints"). Both the Visa Rules

V network and

restrictions

to merchants under the

MasterCard Rules

impose substantially the same common restraints, including the requirements that merchants must

honour all same network (the "Honour All Cards Rule") may not impose

surcharges on any credit card of the same network, of the Merchant

Discount Fee use a particular credit card (the "No Rule").

-7-

The and Rules have so rules in essence in common and so

t!'""',cI"n,rpc In as to be one set ofrules in common. Included in these common rules are

Merchant Restraint Rules the rules which result in the Merchant Discount overcharge.

36. The Merchant Restraints merchants effectively '-'''''''.''''-'1 customers to use

methods payment, and declining to certain Visa and MasterCard credit

including those with higher Merchant Fees such as premium cards. The

Merchant

MasterCard credit as compared to

surcharges to made by

modes of payment such as and debit cards.

of the Merchant Restraints is to impede or constrain competition for credit network

induding competition with respect to Merchant Discount and artificially the

cost of goods and services for Saskatchewan and Canadian consumers.

37. a consequence of the Merchant consumers pay the same for goods

services by merchants regardless of of payment, higher cost to merchants

Visa and MasterCard credit transactions.

38. effect of the Merchant Restraints is that Merchant Discount Fees in Canada are far in

excess similar fees in other jurisdictions where the Merchant are not or are

applied differently.

39. In

including

Fee).

typical Visa or MasterCard transaction, funds flow from cardholders to Banks,

Defendant which deduct the Fee, and to Acquirers who

to Visa or and finally pay the to

prIce on any less the lotal applicable

Visa and MasterCard credit card lS

Discount

to either

Visa or MasterCard along with Bank and Acquirer associated with that

of the Merchant Discount Interchange

Network and was not to merchants.

40. Visa, MasterCard, the Banks, and Acquirers to the

Discount by the Visa MasterCard Members through two

4L

MasterCard

Banks bundle credit with various features such as

Members pay some or all of the cost of these

and points. Visa and

essentially subsidizing the

as

42. structure of the Visa and ""a.">'.\...1 credit card network allows Issumg

to create powerful incentives Loyalty Programs for customers to use Visa or MasterCard

credit for as many transactions as possible, offering reward points or cash back for each dollar

spent on premium credit cards.

43.

onto

at

Cards

high the

this

44.

45

Merchant Restraints allow Banks to offload the cost ofthese Loyalty Programs

who must choose to ,."."",,, .... _ whatever fees are or not to accept credit

who in tum charge more and services to these costs. The All

forces merchants to any and all Visa and MasterCard credit cards, no matter how

for using that particular The No Surcharge Rule merchants from

expense along to customers who pay with premium cards.

and all consumers are paymg more and services than they

the No

modification is

damage and the wrongful practice

significant

imposing the No Surcharge

as a result of the

the Honour All

Rule upon merchants through the use of the Duopoly power of the Defendants.

46.

47.

reduced

No Surcharge Rule

MasterCard, some

is not imposed

the United States.

merchants to charge the same whether the customer

debit card, or and effectively

with credit companies anywhere except

Plaintiff and Class lose as a result of the No Surcharge because merchants

as a result of higher by being required 10 comply with the No Surcharge

Merchant Discount but averages about 5%.

-9-

48. Saskatchewan Canadian customers are induced by the to utilize Visa

or MasterCards by

49. Loyalty Programs provide cash back to the user, air plane flight benefits identified

entry into travel as dollar value use to buy goods or services, gifts or on

lounges, tickets to events or products, and a variety of

50. The actual

MasterCard.

for sale in to

to consumer is in the range of2%

the increase the cost of the

Merchant Discount Fees and the higher

""~''''''''rI on the Visa or

that they offer

o[saJes by Visa

or MasterCard, the more must increase his costs to cover the

51.

Saskatchewan

Charge Credit

52. If all

Canadian people pay more for their

people receive back, by way

than they pay in increased costs.

by Canadians were made through

IOpr'l1H',><: as prices rise and

or the value orNo

the increased cost

to Saskatchewan and Canadian people, above what competition would mandate, for the same goods

and services, would about 5% which is more than the reaJ

Loyalty

Canadian

Saskatchewan and

53. In

would receive on

charge.

would waste J%

consumers and the real

elsewhere, outside of Canada and

and services, and at their option are permitted to

services who by Visa or MasterCard. Merchants

of

the goods and services.

through the value of

people and the

to

and

'-', ... " ... ." merchants provide goods

with purchasers of goods

of Canada and the United

are permitted to goods and services at a lower and di price jf payment is made by cash

or debit card than ifpayment is made by Visa or often with three prices - cash, a couple

of percent more debit card, and jn the range of5% more ifby Visa or MasterCard. The typical

higher rate in 1S the typical higher rate in South America is 8% to 10%.

-1

Duopoly

Various Issuing including the Desjardins, Scotiabank,

TD) with others not named as defendants, the improper ""V".,.""'', of power as a

duopoly have engaged in unlawful conduct and into anti-competitive including

with Visa, each other, and other regarding the rates Interchange

to Issuing Banks by Acquirers within the card network. ClSC, Desjardins,

are and the allocable

to, and the co-conspirator Issuing Banks.

Various Acquirers not named as defendants participated in the unlawful conduct and

into anti-competitive includingagreements with each other, the Issuing Banks.

to these Acquirers merchant with merchants across

including the Visa Class Members, imposed common anti-competitive terms

including the Merchant Restraints the Honour All and No Surcharge

In The resulted in the imposition of rates for

Discount Fees paid by the Visa Class Members. ClBC, Desjardins, Scotiabank, and

are jointly and severally liable for the actions damages allocable the Acquirers.

TD Global Peoples Trust,

Elavon, Desjardins and Chase Paymentech Solutions.

56. During the CJass Period, senior executives and employees of Visa, CIBC, Desjardins,

Scotiabank, and TD and acting in their as agents for defendants, engaged in

communications, and attended with a result

communications and Visa, CIBe, RBC, and TD and

unlawfully conspired or <>""",,,",,,11 to:

(a) lmpose Merchant Restraints set out in the Visa Rules on merchants induding

(b)

Visa Members and thereby unreasonably rates of

Discount paid by merchants, including the Members, for

made Visa credit cards in

maintain, increase, or ""'nIT,,,,

including Saskatchewan;

including Saskatchewan;

rates

(c) exchange information in order to monitor and enforce to the agreed upon

Merchant Restraints in Canada including Saskatchewan; and

58.

(d)

-11-

control the supply af credit card netwark servIces m

Saskatchewan.

including m

furtherance purpose, Period, Desjardins,

(a)

(b)

(c)

Cd)

(e)

(f)

and and their servants

increased or maintained the default rates far Merchant Discount in Canada,

ind uding ~ .... ,."'-<HY>

controlled

Merchant

supply of credit card

on merchants in

communicated, in person and by

default rates Discount

exchanged infOlmation regarding

volume of transactions using Visa

enforcing to the agreed

took and did,

from

Rules including the by imposing the

including in u ... "',,-(.,,,",,

to discuss,

Canada, including

and fix the

rates for Merchant Discount Fees and the

cards for the of monitoring and

Merchant Restraints;

the rates of the constituent elements of

disciplined which to impose the or

merchant which failed ta comply with the Merchant Restraints.

Visa, CIBC, RBC, Scotiabank,

wrongfully in concert and predominant

TD and others were motivated to work

and predominant concerns were to:

Ie

(a) harm the plaintiff and other

supracompetitive rates for Merchant

(b) illegally their profits.

The acts done by Visa, ClBC, Desjardins,

and done by officers,

In

Members by them to pay

Fees; and

Scotiabank, and TO were authorized,

agents, employees, or representatives

ar transaction business affairs.

-I

The MasterCard Duopoly

60. Issuing including defendants Capital One, Chi, MBNA.

National, and along with others not named as defendants, employing the improper exercise

power as a duopoly have in unlawful into anti-competitive

agreements, including with MasterCard, each and other Banks

the rates ofInterchange paid to Issuing by Acquirers within the MasterCard credit card

MasterCard, BMO, One, CIBC, , MBNA, National, and RBC are jointly and

liable for actions of, and allocable to, the co-conspirator Issuing Banks.

61. Acquirers not as defendants particjpated in alleged unlawful conduct and

into anti-competitive agreements, including agreements with MasterCard, each and

the Banks. Pursuant to these the entered into merchant agreements

with merchants across including the MasterCard Members, which imposed common

anti-competitive terms and conditions, including and the Honour All Cards

and No Rule in resulted in the imposition of

supracompelitive rates Merchant Fees paid by the MasterCard Class Members.

MasterCard, CIBC, Citi, National, RBC are and severally

liable for the of, and allocable to, the Acquirers. Acquirers include Moneris

Solutions, TD Merchant Services, Payments, Trust, Elavon,

and Paymentech Solutions,

During the Period, and employees of MasterCard, BMO, Capl tal One,

CIBC, MBNA, National, RBC, and others, acting in capacities as for

engaged in communications, conversations, and attended with each a result of

to: communications and MasterCard others unlawfully conspired or

(a) impose the Merchant Restraints set out the MasterCard Rules on merchants,

(b)

including the MasterCard Members, thereby unreasonably increase the

rates of Merchant Discount paid by merchants, including the MasterCard Class

Members, for payments made using MasterCard credit cards in Canada including

Saskatchewan;

fix, maintain, increase, or control the rates Merchant Fees in

including Saskatchewan;

63.

-13-

(c) exchange information in to monitor and adherence to the agreed upon

Merchan1 Restraints in including Saskatchewan; and

(d) control the supply of credit card network in Canada including

Saskatchewan.

furtherance of this unlawful during the MasterCar:d,

One, Citi, MBNA, National, and others, and their servants and agents:

64.

increased or the default rates Merchant Discount In

including Saskatchewan;

(b) controlled the supply t card services by imposing the MasterCard

(c)

(d)

(f)

including the

Saskatchewan;

Restraints on

communicated, and by telephone, to

default rates Discount Fees

in Canada, '

standardize, fix the

including

exchanged information regarding the rates Merchant Discount the

volume of transactions MasterCard credit for the purposes of monitoring

and enforcing adherence to the agreed upon Restraints;

took active did, conceal the rates of the constituent of

disciplined any Acquirer which failed to impose Merchant or

merchant which to comply with the Merchant Restraints,

MasterCard, BMO, Capital C18C, Citi, MBNA, National, and RBC, and others were

to work wrongfully in ,'nl'lI',..,'rI and their predominant purposes and predominant concerns

were to:

harm the plaintiff other

supracompetitive rates for Merchant

(b) illegally their profits.

The acts done by MasterCard, BMO, Capital

were authorized, ordered, and by their respective

of each Ie in the

Members by

and

them to pay

ClBC, Citi, MBNA, National, and RBC

directors,

direction, control, or

employees, or

of its

-I

of Action

Plaintiff 'nrr\rn,(\rl'lfp'~ the assertions set f0l1h

Unlav,jul fnlerfeJ'ence with Economic Interests

67. or alternatively, acts particularized

to

Members, and the are jointly and

with economic interests.

Breach of/he Compelilion Act

were unlawful acts

Class

liable for 10rt

by the

MasterCard

68. Further, or alternatively,

Competifion Act, R.S.

acts particularized are in breach of Part VI

c. 19 (2lld SuppJ.) ("Competition Act'), and were and are

unlawful, and render the jointly and liable to pay costs of

u,., .... ~, .. pursuant to s. of Competition

69. Further, or alternatively) the acts particularized

Act at the time acts were commit1ed, and

were in breach of

were unlawful.

45 of the

70. acts particularized were unlawful acts

and MasterCard Class Members, which unlawful acts

would likely cause injury to the Plaintiff and other

towards plaintiff and other Visa

defendants knew in circumstances

and MasterCard Class Members and, as

such,

71.

defendants are

purpose

Class

The Plaintiffand the

defendants' unlawful

During the Class

for the tort of civil conspiracy. Further, or alternatively, the

acts particularized herein was to injure the Plaintiff and other Visa

the defendants severally liable tort of civil

V isa and MasterCard Members suffered as a result

with their economic interests.

Plaintiff and Class

Members entered into standard form merchant with Acquirers containing the

violations

MasterCard

they would have

-1

pursuant to

paid more for Visa

the absence of the illegal

and MasterCard Rules. By reason

MasterCard credit card network

and, as a result, they have been

in their property and have suffered in an amount presently undetermined

("Merchant Discount Fee Overcharge"), and suffered a loss of business because of hIgher

which it was compelled by economic forces to

Restraints.

Punitive

73.

outrageous,

of the

thal the defendants'

"'VI\~I'-"", wanton, without care,

the rights of each

flowing from the operation of the Merchant

as herein was

wilful, and in contumelious

Class Member, indifferent to

consequences, aware the effect of increased costs and the damage to the

Canadian economy, in circumstances where tile and pal1icularly Visa and

are aware worldwide non Canadian and practices, and, as such, {he

defendants jointly and severally liable to pay punitive damages.

74. amount punitive damages mus! of magnitude to deter the

MasterCard, from practices and in particular Merchant

75. judicial arm of governance to economic on behalf of

Canadian not even understand the nr,...npr additional financial by

that the use the duopoly power of the to take advantage Canadians will not be

tolerated to end.

Unjust Enrichment, Constructive Trust, and Waiver of Tort

76. the Plaintiff waives tort pleads (hat all Class

Members are to recover under

77. have each been

and the wrongful benefits

princjples.

by the receipt of the IVlercnamDiscount Fee

to Defendants from the of Merchant

-16-

Restraints. Visa and MasterCard Members suffered a deprivation in the amount of such

of the Merchant Restraints. Merchant Discount Overcharge and from the

78. the Merchant Discount Fee that was

Visa and Class Members resulted from the defendants'

by the defendants

orunlawfuJ

Ihe

there

is and can be no j the defendants' retaining any part such overcharge

79.

from the Merchant Restraints.

defendants are as constructive trustees in favour and

Members for of the Merchant Discount Fee and from the Merchant

because, other reasons:

(a) the defendants were unjustly by receipt Merchant Discount Fee

Overcharge and from lhe Merchant Restraints;

(b) the a deprivation paying the Discount

Overcharge and benefits Merchant Restraints;

(c) conduct committed wrongful acts by

in the claim;

(d) the Merchant Discount Overcharge and from the Merchant Restraints

(e)

(0

(g)

were acquired such lhat the defendants not in good

retain them;

require the imposition a constructive trust;

the integrity of marketplace would be

constructive trust: and

are no factors would, in

benefits from the Merchant

constructlve trust unjust.

If the court not impose a

the artificially induced overcharge

render the imposition of a

80. The Plaintiff pleads that equity good conscience requires defendants to hold

Discount Overcharge benefits from Merchant in trust for the

Plaintiff and the other MasterCard Members to disgorge that amount to the

Plaintiff and other Class

- J 7-

RELIEF SOUGHT

81 . The Plaintiff, on its own behalf, and on behalf of the Visa and MasterCard Class Members,

claims against the defendants:

(a) a declaration that the defendants, and each of them, participated in conspiracies to

impose and maintain the Merchant Restraints and Merchant Discount Fees in the

period beginning in at least 2000 to the present in violation of statutory, common

law, and equitable laws as alleged in this claim;

(b) general damages for conspiracy and unlawful interference with economic interests;

(c) general damages for conduct that is contrary to Part VI of the Competition Act;

(d) punitive damages;

(e) damages for the investigation and prosecution of this proceeding pursuant to s. 36 of

the Competition Act;

(f) interest pursuant to The Pre-judgment inferest ACI, SS J 984-85-86, c. P-22.2; and,

(g) such further and other relief as counsel may advise and this Honourable Court may

allow.

DATED at Regina, Saskatchewan, this 12th day of July. 2012.

Delivered By/Address for Service: MERCHANT LA W'cROUP LLP 240 I Saskatchewan Drive

Regina, Saskatchewan S4P 4H8

E.F. Anthony Merchant\ Q.c. Tel: (306) 359-777

Fax : (306) 522-3299

H.IWpdalalClass AClionslCrcdil Card Fcesl$lalcmenl of Claim IS laiC me III orCla,m· Cre<lil Cm! Fees· SK . VS .wpd

Price of Using Credit Cards Going Up? Merchants May Get Surcharge Rig. .. http://online.wsj.com/articte/SB 1000 14240527023040220045775166 J 3."

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[ News. Quoles. COfllla~i es, I

Monday. July 9. 2012 As of 8 4B AM New York 85'158'

BUSINESS

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Business A~ RiI'C1I~ O\ltSOIlI' CC:, Ll'l)ol'o Keeps Produclion In-Housc

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Price of Plastic Going Up? Merchants May Get Surcharge Rights

Article Video Sloe k QUale s Comm. nls (247)

By ANOREW R. JOHNSON

M:JRE IN BUS INc SS »

Available to WSJ.com Subscribers

Merchants may saon begin 10 impose a surcharge eaen lmo a c",lomer pay. \YlIh. c(edll card, • p'ac~co VI.,. and M .. lerCa/d currenlly pronlbll, Andlfffl Jonr-..on Ma. dol. Its "" The Now.> Hub IPhoIO' Bloomberg News)

Merchants may soon begin to impose a surcharge each tirl"e a custOfT'6r pays wilh a

credit card, a practice Visa Inc, ( V .l .:iO% and MasterCard Inc. I M/o. -2.35% 0 1 currently

prohibil.

Retailers have long pushed for lhe right 10 charge exira 10 cuslorrers who pay wrlh ptaslic

versus cash, saying Itle practice would help defray their costs for accepting credit and

debit cards. Merchants pay Iransaclion fees on each card sWipeo

Bul VIsa arid MasterCard, which operate the world's largest card-payments networks, ban

the practice in the U S. as pari 01 rules they require relllilers to follow to accept Iheir

cards, That ban is expected 10 be eliminated or altered. though, under a potential

seHlemenl of long-standing lawsuits relailers have brought agamsl the card networks and

nUJrerous bankS that rssue their cards,

"Merchants prefer complele flexrbillty, and in their eyes relaxing some of Ihese rules like

surcharging (lsi sorrethlng Ihat will be permanent," said Glenn Fodor, an analyst With

Morgan Stanley.

Journal Community Sel1lerrenl dlscussioros have taken place

over the past year. and Mr, Fodor and

other analysts have predicted a deal

would be reached before a Seplember iiii'll date lor the litigation, which includes roore

than 50 laWSUits filed since 2005. The suits have been consolidated in U.S. District Court

Tightc)' Control for EI1),o Banks

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7/9/2012 9:3 I PM

Price of Using Credit Cards Going Up? Merchants May Gel Surcharge Rig .. . http://online .wsj .colll/articleJSBIOOO J 424052702304022004577516613 ...

2of4

in Brooklyn.

A seltlerrent is likely 10 include changes 10

Visa and MasterCard rules , including Ihe

card compan ies' ban against surcharges,

analysts have said

A spokeswoman for Visa and a

spokestrel'l for MasterCard declined 10 comment on Ihe status of discussions Friday

Several attorneys involved in Ihe case also declined to comment A settlerrenl could be

fiMlized as soon as this week, Bloomberg News reported lasl week.

The laWSUits, filed by merchanls including Kroger Co. , [ K.R · 1.54% I Pay less Shoe Source

and Safeway Inc. l-sv'I'Y . \ .75% I and several trade groups, contend the card grants engage

in antlcornpelilive behavior by corospiring over Ihe fees , known as inlercha~e , Ihal

retai lers pay every tirre a consurrer swipes a card.

Last year a proviSion 01 Ihe DOdd-Frank financial-<>verhaullaw known as Ihe Durbin

amendment look ellect. cutling in half the sWipe fees on debit-card trar.sactions.

However, 1( lett credit-card sWipe fees untouched.

So-called SWipe fees are sel by Visa and MasterCard but co llected as revenue by the

banks Ihal issue lI'Ieir cards. In addllion 10 the card networks, the suits name large banks

including Bank of Arrerlca Corp., l l3Ac · 1.31% J.P. Morgan Chase JPM . iJ:)8·%, & Co.,

~ Inc. ~I and Wells Fargo j Y'!!'~ ... !.u.:65.'l:..1 & CO.

"We conllnue 10 Oelieve that a selilemen! IS Ihe likeliesl outcome as neilher side wanls a

drawn, out legal baltle and Ihe defendants don'l want to ri sk having to pay treble damages

Illhey lose," Sanjay Sakhrani, an analyst With Keefe , Bruyette & Woods, wrote in a research nole lasl month.

Audio Andrew R. Johnson slopped by The Dally

Wrap Irom The Wall Streel Journal to

diSCUSS what consumers need to know.

00:001 .. ~ 00;00

A selUemenl is likely to have Ihree

components : payments by the defendanls

ranging from $8 billion to $12 billi on, a

te~orary reduclion in Interchange fees

and the elimnahon of Ihe no·surcharge

rule, according to KBW

Relail experls say the ability 10 assess a

surcharge would have a longer-Ierm benefit to merchanls than a lemporary reduclion in

fees or monetary payments. The rationale is lI'Ie praclice could exert pressure on II1sa

and MaslerCard to treke more permanent cuts 10 card fees. The networks rely on

transaction volume tor revenue, and the threat of lOSing transacllon volume if consumers

stopped using their cards because of surcharges may prompt the card networks 10 lowel

cosls.

"If there were surcharges in the rmrket place ... lhe networks, who are prirmnly

responsible for establishing pnces for acceplance, would bring their product cosls down,"

sa id Mark HalWedel, a former executive at Wal·Marl Siores Inc. I WI·~'~.5G% I who

handted payments·relaled matters and is now chief execuhve officer of the Merchanl

Advisory Group. which represents merchants in paymenls·industry issues.

Visa and MasterCard In lI'Ie past have loosened olher Nles Ihat have been a Ihorn in the

side of merchants. Under a selllerrent wllh the U.S. Justice Departmenl last year. Ihe two

corrwnies agreed 10 drop Nles that prohibit merchants from offermg discounts and other

perks 10 steer customers 10 lower-cost cards or cash. The card companies have been

more agreeable to discounltng as opposed 10 surcharges because the former practice IS

seen as being less punitive 10 consumers.

Cred it·Card Rales Rise Again

Real ,Tlme Advice: 8orrowers co~~nue 10 pay record low reles, wilh One major el<Cepllo~­

credtl card • . One solution don'l use Ihem.

II1sa and MasterCard allow 1\

In Ihe U.S., 10 states, including New York

and California , have laws prOhibiting

sUfCharges, according to Visa. It is

unclear whether merchants in those slates

would be able to ef"\98ge in the practice If

A change in Visa's and MasterCard's rules also wouldn't affeci purchases made wilh

The: lIidtll"'H Cos l,. "fPull)}C: \'"i·Pi ()2:48

Clintnn J\l\oJo)t;i:l.c,' c;.: fur RH ,.,.h ·r,,~ ·cut ( ; It fl" 02:5&

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7/9120129:31 PM

Price of Using Credit Cards Going Up? Merchants May Get Surcharge Rig. .. http://online.wsj.comlarticle/SB 10001424052702304022004577516613 ...

30f4

cards Irom Arnencan Express Co. jl\XPT3ii%1 and Discover Financia' Services.

r DFS ·0.85% J which aren', pari of the litigation.

Arrerican Express's contracts discourage surcharges but allow it so long as rrerchants

also surcharge custorrers who pay with other payrrent networks' cards, a spokesworran

said. Discover has a SImilar policy, This has rreanl that merchants who accept all four

card brands have been unable to surcharge because 01 Visa and MasterCard rules

prohibiting surcharges on their cards.

JOIN 1HE DISCUSSION

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