Quote:
Originally posted by magicmike
Someone want to post the text? I don't want to register.
Is this anywhere else yet?
|
Here you go...
Company Sues MasterCard Over Fees for Online Sales
May 13, 2003
By JENNIFER BAYOT
Paycom Billing Services, a company that processes credit
card and check transactions for online merchants, sued
MasterCard International yesterday, asserting that
MasterCard violated antitrust laws and charged excessive
fees.
The suit, filed in Federal District Court in Los Angeles,
seeks at least $23 million in damages. It signals that
Internet vendors might pursue their own antitrust
accusations against the card network. Last month,
MasterCard settled a class-action case brought by
retailers, agreeing to pay $1 billion and to reduce its
debit card fees, among other concessions. Visa USA, a
co-defendant in the case, reached its own settlement two
days later.
"The publicity from that lawsuit has caused Internet
retailers to question how Visa and MasterCard treat them,"
said Joseph Cohen, a partner at Beirne, Maynard & Parsons,
a Houston law firm. "It's sort of like a shark who sees
blood in the water."
The lawsuit by Paycom, which is based in Marina del Ray,
Calif., asserts that MasterCard uses its market power to
charge Internet vendors excessive fees. Under MasterCard's
rules, online merchants pay much more than traditional
retailers to accept credit card transactions, as much as
three or four times as much, according to The Nilson
Report, which tracks payment systems.
The higher fees apply whenever a customer cannot physically
present a card to make a purchase.
MasterCard has said the higher rate reflects the amount of
fraud on the Web. According to Celent Communications, a
research firm in Boston, fraudulent transactions account
for more than 2 percent of online card spending, compared
with 0.1 percent for in-store charges.
Most of Paycom's billing clients are sex-related Web sites,
which industry experts say are more prone to fraud and
"chargebacks," the term for purchases that customers deny
making. Paycom says it processes about two million
transactions a month.
David Robertson, publisher of The Nilson Report, said
Internet companies were plagued by "friendly fraud," in
which "your perfectly valid cardholder can deny a
transaction he willingly made."
MasterCard, based in Purchase, N.Y., said it could not
comment on the lawsuit because it had not yet been served
with Paycom's complaint.
Paycom's lawsuit also includes a frequent grievance of
online merchants: that they must pay for any losses on
fraudulent transactions. In contrast, any fraud associated
with in-person transactions is absorbed by the credit card
issuers.
Christopher Mallick, Paycom's chairman, predicted that
other Internet companies would join the lawsuit or file
their own.
"I can see this - or something like this - turning into a
class action," he said. "There are thousands and thousands
of merchants being affected by this."
Paycom said it had excluded Visa from its lawsuit because
Visa had worked harder to reduce fraud, instead of leaving
merchants to shoulder much of the cost. Mr. Mallick added
that Visa's penalties for chargebacks were more reasonable.
"Although restrictive, we think they're fair," he said.
Over the last two years, both Visa and MasterCard have
created products that authenticate online transactions.
When online vendors use the new systems, called MasterCard
SecureCode and Verified by Visa, their customers must type
in passwords to make purchases, much as they use personal
identification numbers at teller machines. The merchants
are then no longer liable for fraud; instead, the card
companies agree to pay for losses.
http://www.nytimes.com/2003/05/13/te...9ae4df0d3520b9
http://www.nytimes.com/ads/nytcirc/index.html