isa U.S.A. and MasterCard International are no strangers to allegations of antitrust violations. Only last year, the U.S. Supreme Court refused to hear their rebuttal to a federal appeals court decision, which ruled that their practices of prohibiting member banks from issuing other card brands were anticompetitive (U.S. v. Visa and MasterCard).

Now, Visa and MasterCard, along with their issuing banks, will go to court to argue that their at-will increases of interchange fees with no regulatory caps do not amount to price-fixing. While the electronic payments system and these card brands are widely used and show signs of continued growth, the fervor surrounding interchange has been building for quite some time.

A group of merchants filed a lawsuit in U.S. District Court in Connecticut based on charges that interchange fees serve as a hidden tax on merchants, a portion of which is transferred to consumers, even if they pay with cash.

The lead plaintiffs, representing merchants around the country, are Irvine, Calif.-based 30 Minute Photos Etc.; St. Paul, Minn.-based companies Traditions Classic Home Furnishings and CHS Inc.; Bridgeport, Conn.-based A Dash of Salt LLC; and Newton, Conn.-based KSARRA LLC.

Defendants in the lawsuit include Visa, MasterCard, Bank of America Corp. (BofA); JPMorgan Chase & Co.; Citigroup; MBNA Corp.; and Wachovia Bank.

Interchange fees cost American families an estimated $232 a year and amount to a $20 billion profit for the card Associations and their member banks, the plaintiffs said. In their suit, they are demanding price caps and rollbacks.

In early May 2005, at a conference on interchange at the Federal Reserve Bank of Kansas City, MasterCard General Counsel Noah Hanft said, "Consumers and merchants get a great deal from MasterCard; it's that simple. He added, "Interchange is highly beneficial, efficient and pro-competitive," and "No one has found interchange to be illegal.

"Pricing is just not the job of a regulator, or a court, or a class action lawyer. A private payment system is best able to set its own rates because it is best able to determine its costs and value and how to maximize output and efficiency," Hanft said. Craig Wildfang, the attorney representing the plaintiffs said, "We prefer a system where the interchange fees are set by competition, not agreement by all of the banks. It's quite likely that under a restructured system that the most competitive outcome would be the absence of an interchange fee. If competition determined some other fee, then so be it. The problem is that banks get together in a room and decide what the price is going to be."

Paul Cohen, Vice President of Visa U.S.A. said in a statement, "This current effort to undermine the interchange system must be understood for what it is: A clear attempt by merchants to receive all the value of electronic payments, while shifting their normal costs of doing business onto consumers."

A BofA spokesperson said that the bank had not yet been served with the lawsuit and therefore had no comment. Representatives of the other banks named as defendants could not be reached.

Mitchell Goldstone of 30 Minute Photo is the lead plaintiff in the case. He described the Associations and banks as working to together to horizontally "fix" the price of interchange with an "unbridled capacity to constantly increase these fees."Goldstone said, "I know exacly as an entrepreneur what my cost of goods sold are, what everything involved with my business is. I have not a clue what my interchange fee is. Withmy margins being so razor thin, that is substantial."

A precedent in favor of interchange oft-cited by the card Associations is the 1986 NaBanco decision. NaBanco, an acquiring bank, sued Visa over supposedly "fixed" interchange rates and lost. Among the rulings that came out of this case was that credit cards were just one of many payment types, and therefore Visa only had a small percentage of the market share. The amount of market share is essential in determining an antitrust violation.

According to Wildfang, two cases since the NaBanco case have proven that the Associations have considerable market share. One of these cases is the aforementioned "U.S. v. Visa and MasterCard." In that case, "The court found that the market is no longer that broad," Wildfang said. "Now it is credit card network services, and in that Visa and MasterCard have considerable market power."