Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_02-cv-01786/USCOURTS-cand-3_02-cv-01786-45/pdf.json

Nature of Suit Code: 840
Nature of Suit: Trademark
Cause of Action: 15:1114 Trademark Infringement

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United States District Court

For the Northern District of California

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NOT FOR PUBLICATION

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

VISA U.S.A. INC., a Delaware corporation,

Plaintiff and Counterdefendant,

 v.

FIRST DATA CORPORATION, a Delaware

corporation; FIRST DATA RESOURCES,

INC., a Delaware corporation; and FIRST

DATA MERCHANT SERVICES

CORPORATION, a Florida corporation,

Defendants and

Counterclaimants. /

No. C 02-01786 JSW

ORDER DENYING VISA’S

MOTION FOR PARTIAL

SUMMARY JUDGMENT 

Now before the Court is Visa’s motion for partial summary judgment. Visa moves this

Court for an order finding that (1) First Data lacks antitrust standing to challenge certain of

Visa’s regulations; (2) First Data improperly seeks damages outside of the relevant markets; (3)

First Data’s attempted monopolization claim in the debit market fails as a matter of law; and (4)

each of four independent allegations in the counterclaim fails to constitute an independent

antitrust violation and should therefore be adjudged in Visa’s favor. Having carefully read the

parties’ papers and considered the arguments and the relevant legal authority, the Court hereby

DENIES Visa’s motion. 

BACKGROUND

The extensive facts are familiar to the parties and to the Court and have been recited

extensively in previous orders. The Court will address the specific facts relevant to this motion

as they are pertinent to the analysis.

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ANALYSIS

A. Legal Standard on Summary Judgment.

A principal purpose of the summary judgment procedure is to identify and dispose of

factually unsupported claims. Celotex Corp. v. Cattrett, 477 U.S. 317, 323-24 (1986). 

Summary judgment is proper when the “pleadings, depositions, answers to interrogatories, and

admissions on file, together with the affidavits, if any, show that there is no genuine issue as to

any material fact and that the moving party is entitled to judgment as a matter of law.” Fed. R.

Civ. P. 56(c). 

A party moving for summary judgment who does not have the ultimate burden of

persuasion at trial, must produce evidence which either negates an essential element of the nonmoving party’s claims or show that the non-moving party does not have enough evidence of an

essential element to carry its ultimate burden of persuasion at trial. Nissan Fire & Marine Ins.

Co. v. Fritz Cos., 210 F.3d 1099, 1102 (9th Cir. 2000). A party who moves for summary

judgment who does bear the burden of proof at trial, must produce evidence that would entitle

him or her to a directed verdict if the evidence went uncontroverted at trial. C.A.R. Transp.

Brokerage Co., Inc. v. Darden, 213 F.3d 474, 480 (9th Cir. 2000). 

Once the moving party meets its initial burden, the non-moving party must go beyond

the pleadings and by its own evidence “set forth specific facts showing that there is a genuine

issue for trial.” Fed. R. Civ. P. 56(e). In order to make this showing, the non-moving party

must “identify with reasonable particularity the evidence that precludes summary judgment.” 

Keenan v. Allan, 91 F.3d 1275, 1279 (9th Cir. 1996). It is not the Court’s task to “scour the

record in search of a genuine issue of triable fact.” Id. (quoting Richards v. Combined Ins. Co.,

55 F.3d 247, 251 (7th Cir. 1995). If the non-moving party fails to make this showing, the

moving party is entitled to judgment as a matter of law. Celotex, 477 U.S. at 323. An

issue of fact is “genuine” only if there is sufficient evidence for a reasonable fact finder to find

for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986). A

fact is “material” if it may affect the outcome of the case. Id. at 248. “In considering a motion

for summary judgment, the court may not weigh the evidence or make credibility

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determinations, and is required to draw all inferences in a light most favorable to the nonmoving party.” Freeman v. Arpaio, 125 F.3d 723, 735 (9th Cir. 1997).

B. Antitrust Standing Regarding Visa’s “Honor All Cards” Rules.

1. First Data’s Allegations in the Second Amended Counterclaim.

First Data’s Second Amended Counterclaim includes causes of action for

monopolization and attempted monopolization. First Data alleges that its claims relate to the

Visa credit card network processing services market (for its first cause of action for

monopolization) and/or the general purpose credit card network processing services market (for

its second cause of action for attempted monopolization in the credit card industry) and/or the

debit card network processing services market (for its third cause of action for attempted

monopolization in the debit card industry). (See Second Amended Counterclaims (“SACC”), 

¶¶ 82, 100, 111.) First Data, as a seller in the Visa credit card network processing services

market, posits that, among other actions, Visa has willfully maintained its monopoly power in

the relevant market by: (1) demanding that First Data comply with unreasonable conditions

before approving the First Data Net pilot for Visa transactions; (2) subsequently banning the

implementation of First Data Net and all new Private Arrangements, with the intent of blocking

First Data’s competition in providing credit card network processing services for Visa

transactions; and (3) blocking competition on interchange fees and merchant discounts through

its “honor all cards” rule and its associated no discounts rule and its ban on intra-processing. 

(See id., ¶ 89.) As a result of this and other alleged conduct, First Data asserts that it has been

injured in that (1) it is constrained from expanding its offerings and from adequately providing

its current services in the relevant market; (2) its goodwill and reputation are thereby harmed;

(3) it is forced to pay an overcharge on interchange reimbursement fees and processing fees that

it would not have had to pay but for Visa’s anticompetitive conduct; and (4) it has lost profits

from the potential intra-processing transaction of its clients. (See id., ¶ 97.) 

First Data contends that the ban on point of sale discounts and promotion removes

incentives for banks to enter into bilateral interchange agreements and thus stifles price

competition among horizontal competitors. (See Opp. at 8; see also SACC ¶ 78.) Moreover,

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First Data contends that, in combination with the intra-processing ban which has the effect of

preventing First Data from facilitating those agreements, Visa’s regulations limiting discounts

at point of sale is anticompetitive. (See SACC ¶ 80 (alleging that the “‘honor all cards’ rule is

anticompetitive and harms third-party providers of network processing services, such as First

Data. It also harms FDMS [First Data Merchant Services Corporation] as a merchant acquirer

because it pays artificially high interchange fees. In the absence of the ‘honor all cards’ rule

and Visa’s other anticompetitive practices, First Data would be able to compete to provide Visa

credit card and debit card network processing services. For example, it could work with

merchants and issuers to offer discounts and incentives for the use of cards for which First Data

provides intra-processing. This would provide savings in the form of lower interchange fees to

merchant acquirers. Some of these savings would be passed on to merchants, and ultimately to

consumers in the form of lower retail prices.”)

First Data’s economic expert, Professor Hausman attempts to calculate damages by

comparing the actual interchange rates charged to those that ostensibly would have been

charged absent Visa’s exercise of market power as alleged by First Data in its counterclaims. 

(See Declaration of Jerry A. Hausman (“Hausman Decl.”), Ex. B at ¶ 36.) 

2. Visa’s Rules and Regulations.

Visa alleges that First Data’s challenge to the “Honor All Cards” rule fails because First

Data lacks antitrust standing to make such a challenge. Among many other rules in Visa’s

extensive operating regulations, Visa adopted what it calls the “Honor All Cards” rule whereby

merchants desiring to accept any Visa-branded payment card must accept all Visa-branded

payment cards. An associated aspect of the “Honor All Cards” rule precludes, subject to some

exceptions, point of sale discounts or preferences to some Visa issuers’ cards over other issuers’

cards. (See Declaration of Sujal J. Shah (“Shah Decl.”), Ex. I; Supplemental Declaration of

Sujal J, Shah, Ex. I; see also Declaration of Aaron S. Edlin, Ph.D. (“Edlin Decl.”), Ex. E at ¶

46.) 

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3. First Data’s Theory of Damages Related to Point of Sale Discounts.

First Data alleges that absent Visa’s mandatory rules on non-discrimination and

limitation of discounts, merchants or groups of merchants could more effectively form

agreements with issuers or groups of issuers to steer customers toward certain cards by

providing point of sale discounts in exchange for lower interchange fees. First Data points to

evidence in the record to support the contention that Visa intended to limit competition by

enforcing the no discounts rule. (See Shah Decl., Ex. J (internal Visa memo indicating that, in

deciding to enforce the no discounts rule, Visa was concerned with “competitive tactics” and

the potential for “merchant[s] [to] start to drive deals to move volume”); see also Edlin Decl.,

Ex. C at ¶ 46 (First Data’s expert opining that preclusion of point of sale discounts “tends to

make it more difficult for an issuer to increase its volume by competing with lower interchange

fees, and thereby discourages competition in interchange fees.”). In this regard, First Data

contends that the rule does in fact discourage competition in interchange fees, resulting in,

among other things, the payment of inflated fees by First Data. Id. at ¶ 78 (opining that the

“ban on network processing and the anticompetitive aspects of the Honor-All-Cards rule

discussed earlier, particularly in tandem, have a significant potential to limit interchange

competition among Visa issuers. Interchange competition among Visa issuers would occur if a

given issuer or group of issuers were able to arrange with a given merchant or group of

merchants to trade lower interchange for promotions that generated a sufficient increase in

volume for the issuers.”); see also Shah Decl., Ex. L (Edlin Depo.) at 178:8-15).

An aspect of First Data’s theory of damage is that the proliferation of Visa’s Honor All

Cards rule and limitation on point of sale discounts, in combination with the ban on network

processing, works to maintain a supra-competitive interchange structure by preventing issuing

banks from competing over merchant business which might have the overall effect of requiring

Visa to lower its interchange fees. Again, First Data calculates its damages as the difference

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 First Data also contends that the legality of the default interchange rate depends, at

least in part, on the viability of those alternative agreements. See National Bankcard Corp.

(NaBanco) v. Visa, U.S.A., 596 F. Supp. 1231, 1264 (S.D. Fla. 1984) (noting that the

interchange fee is not mandatory because “NaBanco is and always has been free to negotiate

different terms of interchange, and Visa issuers have been willing to make alternative

arrangements.”); see also National Bankcard Corp. (NaBanco) v. Visa, U.S.A., 779 F.2d 592,

594 (11th Cir. 1986) (finding it significant that “the parties to the interchange are not

required to use BASE II [Visa’s computerized service]. Merchant and issuer institutions are

free to negotiate a different rate and bypass the BASE II system entirely.”) 

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between the actual, allegedly supra-competitive interchange fees it is required to pay and those

fees that ostensibly would have been charged absent Visa’s exercise of market power.1

4. Visa’s Position Regarding Standing.

Visa contends that First Data lacks standing to pursue its claims against Visa’s rules and

regulations governing the availability of point of sale discounts. Visa argues that First Data’s

alleged injury suffered in its role as “intraprocessor” of Visa transactions is too remote to

warrant antitrust standing. Second, Visa contends that First Data, in its role as an “acquirer” of

Visa transactions, is not the appropriate party to challenge the alleged imposition of Visa’s

regulations on merchants. (See Motion at 13.) Visa contends that its regulations are directed to

merchants, and require only that merchants accept all Visa cards in a non-discriminatory basis. 

Visa therefore maintains that any possible injury to or limitation on competition would result in

harm to merchants, and not to intraprocessors, and that any harm allegedly suffered by First

Data would only have been caused derivatively, or remotely, by the alleged violation. (See id.

at 14-15.) Similarly, Visa contends that First Data lacks standing to assert its claims against the

regulations in its status as an acquirer because, again, although the alleged restraint on

merchants may, taking First Data’s allegations as true, have an incidental effect on the level of

the interchange fee, that confuses a direct attack on interchange fees with an attack on the

independent process of setting non-discrimination regulations. Visa contends that First Data’s

attack on the regulations governing conduct by merchants merely sets the level of the

interchange fee as a measure of damages and is not a direct attack on the interchange. (See id.

at 17.) 

The Court finds, however, that there remain questions of fact regarding the relationship

between First Data’s harm and the alleged wrongdoing by Visa. First Data contends that the

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 Further, Visa’s argument is improper for an independent reason because it attempts

to segregate the various allegations of anticompetitive conduct. See Continental Ore Co. v.

Union Carbide & Carbon Corp., 370 U.S. 690, 699 (1962) (holding that “plaintiffs should be

given the full benefit of their proof without tightly compartmentalizing the various factual

components and wiping the slate clean after scrutiny of each.”) The allegations in the second

amended counterclaim include both the ban on intraprocessing and the enforcement of Visa’s

regulations limiting discounts at the point of sale. The contention is that both actions by

Visa, in tandem and in combination with other conduct, have worked to effectuate an

unlawful restraint of trade.

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intraprocessing ban and the rule limiting discounts, separately and acting in tandem, preserve

and enforce what it contends represents an interchange cartel maintained by Visa. First Data

contends that the rules effectively restrain Visa members from entering into bilateral

agreements which might otherwise undercut the default interchange rate set by the Visa Board. 

The issue of whether Visa’s regulations limiting the scope and availability of discounts at point

of sale as well as other practices, in concert with its ban on intraprocessing, causes members not

to negotiate separate interchange agreements and whether those agreements would have

lowered the overall interchange fee, is a question of fact. The Court finds that First Data has

made sufficient and factually supportable allegations regarding the combined acts of Visa to

afford it antitrust standing to submit the issue for resolution to a jury.2

5. Antitrust Standing.

The class of persons who may maintain a private damage action under the antitrust laws

is broadly defined in Section 4 of the Clayton Act, which provides in pertinent part: “Any

person who shall be injured in his business or property by reason of anything forbidden in the

antitrust laws may sue therefor in any district court of the United States in the district in which

the defendant resides or is found or has an agent, without respect to the amount in controversy,

and shall recover threefold damages by him sustained.” 15 U.S.C. § 15. “A literal reading of

the statute is broad enough to encompass every harm that can be attributed directly or indirectly

to the consequences of an antitrust violation.” Associated General Contractors of California v.

California State Council of Carpenters (“AGC”), 459 U.S. 519, 529 (1983). However broadly

described, it “is reasonable to assume that Congress did not intend to allow every person

tangentially affected by an antitrust violation to maintain an action to recover threefold damages

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for the injury to his business or property.” Blue Shield of Virginia, Inc. v. McCready, 457 U.S.

465, 477 (1982). 

The plaintiff must have antitrust standing and to determine whether that requirement is

met, the Court must “evaluate the plaintiff’s harm, the alleged wrongdoing by the defendants,

and the relationship between them.” ACG, 459 U.S. at 535. The Ninth Circuit has summarized

the factors relevant to a finding of antitrust standing as follows: “(1) the nature of the plaintiff’s

alleged injury; that is, whether it was the type the antitrust laws were intended to forestall; (2)

the directness of the injury; (3) the speculative measure of the harm; (4) the risk of duplicative

recovery; and (5) the complexity of apportioning damages.” Knevelbaard Dairies v. Kraft

Foods, Inc., 232 F.3d 979, 987 (9th Cir. 2000) (quoting American Ad Mgmt. v. General Tel.

Co., 190 F.3d 1051, 1054-55 (9th Cir. 1999)). To conclude that there is antitrust standing, the

Court need not find in favor of the plaintiff on each factor. American Ad Mgmt., 190 F.3d at

1055 (citing Amarel v. Connell, 102 F.3d 1494, 1507 (9th Cir. 1997)). Instead, the Court must

balance the factors, giving great weight to the nature of the plaintiff’s alleged injury. Id.

a. Antitrust Injury.

The first factor – the nature of plaintiff’s alleged injury – requires a showing of

“antitrust injury, i.e., injury of the type the antitrust laws were intended to prevent and that

flows from that which makes defendants’ acts unlawful.” Knevelbaard, 232 F.3d at 987

(quoting Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 334 (1990)). Parsing the

Supreme Court’s definition of injury, the Court must find four factors: (1) unlawful conduct, (2)

causing an injury to the plaintiff, (3) that flows from that which makes the conduct unlawful,

and (4) that is of the type the antitrust laws were intended to prevent. See id. Antitrust injury is

harm that “reflect[s] the anticompetitive effect either of the violation or of anticompetitive

effects made possible by the violation.” Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S.

477, 489 (1977). 

First Data raises a dispute of fact regarding whether it has suffered damages as a result

of the alleged wrongful conduct by Visa in enforcing both its point of sale discounts limitation

and the ban on intraprocessing. First Data asserts that Visa’s conduct, both the ban on

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intraprocessing and the regulations barring discounts in addition to other alleged conduct,

especially in combination, had the effect of eliminating incentives for members to negotiate

bilateral interchange agreements. (SACC ¶ 89; see also, e.g., Edlin Decl., Ex. C at ¶¶ 46, 78.) 

Because the alleged effect of the combination of the intraprocessing ban and the regulations is

the limitation of competition among members to outsource their transactional services, First

Data contends that it has been harmed in its payment of supra-competitive interchange rates and

in its inability to garner further business within the Visa system. (Hausman Decl., Ex. B at ¶

36.)

First Data also asserts that Visa’s conduct led to economic injury because, by setting the

ban on intraprocessing and the regulations on point of sale discounts, Visa was able to maintain

the supra-competitive interchange fees, and First Data was harmed in the payment of those

allegedly inflated fees. (See Hausman Decl., Ex. B at ¶ 36.) First Data contends that the

evidence demonstrates that the alleged injury flows from that which makes defendants’ acts

unlawful because Visa’s conduct had the effect of stifling competition which would otherwise

have increased services business for intraprocessors and reduced the rates acquirers pay for

transactions. (See Edlin Decl., Ex. C at ¶¶ 46, 78; Shah Decl., Ex. L at 178:8-15.) See also In

re Warfarin Sodium Antitrust Litig., 214 F.3d 395, 401 (3d Cir. 2000) (finding antitrust injury

where the “excess amount paid by [plaintiffs] not only is ‘inextricably intertwined’ with the

injury [defendant] aimed to inflict, the overcharge was the aim of [defendant’s] preclusive

conduct. It is difficult to imagine a more formidable demonstration of antitrust injury.”) Lastly,

First Data’s alleged injury is exactly the type the antitrust laws are meant to prevent: “an

increase in price resulting from a dampening of competitive forces is assuredly one type of

injury for which § 4 potentially offers redress.” McCready, 457 U.S. at 482. 

b. Directness and Speculative Nature of the Injury.

First Data must demonstrate injury in fact and the claimed injury must be sufficiently

direct. There “must be ‘not a mere causal link, but a direct effect.’” Knevelbaard, 232 F.3d at

989 (quoting City of Pittsburgh v. West Penn Power Co., 147 F.3d 256, 268 (3d Cir. 1998)). To

assess the directness of the alleged injury, the Court must “look to the chain of causation

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between [the alleged] injury and the alleged restraint in the market.” American Ad Mgmt., 190

F.3d at 1058. Speculative damages are found where the injury is indirect or “may have been

produced by independent factors.” ACG, 459 U.S. at 542. It is “appropriate for § 4 purposes

‘to consider whether a claim rests at bottom on some abstract conception or speculative measure

of harm.’” Id. at 543, quoting McCready, 457 U.S. at 475, n.11. 

First Data alleges, and its experts concur, that the combination of alleged

anticompetitive actions by Visa has resulted in the maintenance of inflated interchange fees and

reduction in the competition among members to negotiate separate interchange agreements, also

resulting in inflation in fees paid by First Data. Visa has identified no independent factors that

may have produced First Data’s claimed damages and First Data has alleged that it has paid

those inflated interchange fees as a direct result of the enforcement of the ban on

intraprocessing in combination with other allegedly anticompetitive conduct including the bar

on point of sale discounts. First Data’s experts opine that the damages First Data has suffered

were caused directly by the limitation of discounts in combination with Visa’s ban on

intraprocessing and other, allegedly anticompetitive conduct. (See Edlin Decl., Ex. C at ¶¶ 46,

78; Hausman Decl., Ex. B at ¶ 36.)

The Court finds there is a dispute of fact regarding the directness and speculative nature

of the claimed injury.

c. Risk of Duplicative Recovery and Complexity in Apportioning

Damages.

“The indirectness of the alleged injury also implicates the strong interest, identified in

our prior cases, in keeping the scope of complex antitrust trials within judicially manageable

limits. These cases have stressed the importance of avoiding either the risk of duplicate

recoveries on the one hand, or the danger of complex apportionment of damages on the other.” 

ACG, 459 U.S. at 543-44. 

Visa contends that finding that First Data has antitrust standing would create a

potentially serious problem of duplicative recovery because Visa is currently facing suit in New

York by merchants, individually or as purported class representatives, who challenge the setting

of interchange fees directly as well as aspects of Visa’s Honor All Cards regulations. (Reply at

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12.) However, this Court is not privy to all of the claims posed by the merchants in the New

York action. There is nothing before this Court to indicate that the merchants seek to challenge

either the ban on intraprocessing or the rules limiting point of sale discounts, or the particular

combination of alleged activities First Data suggests results in an overcharge in fees. Further,

this Court has previously found that First Data, as an acquirer, has standing to challenge the

interchange fees set by Visa. See Kendall v. Visa, U.S.A., Inc., 2005 U.S. Dist. LEXIS 21450,

at *19 (noting that merchant acquirers, rather than merchants, are the proper plaintiffs to sue for

the setting of supra-competitive interchange fees). The Court noted that processing agents for

the member banks have standing to sue and specifically took judicial notice of this pending suit. 

The Court reasoned that, because First Data directly pays the interchange fees and is not a Visa

member, it was in the best position to seek redress for the alleged overcharge in fees set by

Visa. Therefore, based on this record, the Court does not conclude that there is a danger of

duplicative recoveries. 

Lastly, First Data’s alleged injury is the payment of overcharged fees. (Hausman Decl.,

Ex. B at ¶ 36.) Because the Court does not find the nature of the alleged injury suffered by First

Data to be speculative or exceedingly complicated, or necessarily requiring a complex

apportionment of damages, this factor weighs in favor of finding that First Data has antitrust

standing. 

In sum, First Data has raised disputed issues of fact relating to all of the ACG factors

and therefore supports a finding that First Data has antitrust standing and is a proper plaintiff to

bring this suit. Therefore, Visa’s motion for partial summary judgment on the issue of standing

to challenge Visa’s Honor All Cards and limitations on discounts rules is DENIED. 

C. Visa Contends First Data is Not Entitled to Damages Outside the Relevant Market.

In its counterclaim, First Data claims damages in the amount of processing fee

overcharges and lost profits in the network processing market. (SACC, ¶¶ 82, 100, 111.)

However, Visa contends that First Data also seeks to recover for damages allegedly suffered by

its overpayment of the inflated interchange fee in its role as an acquirer of Visa transactions. 

Visa contends that First Data therefore seeks damages in the “systems market” in its role as an

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 Visa also cites Pool Water Products v. Olin Corp., 258 F.3d 1024, 1034 (9th Cir.

2001), which stands for the proposition that private plaintiff can be compensated only for

injuries that the antitrust laws were designed to prevent and it is not sufficient merely to

assert that one has been damaged by illegal behavior. This holding does not contribute

significantly to the analysis.

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acquirer of Visa transactions, which differs from the putative network processing market of the

underlying claims. (See Motion at 19.) Visa contends that “an unbroken line of Ninth Circuit

authority precludes this attempt to recover damages arising in a market or markets distinct from

that in which the antitrust claims are alleged to have occurred.” (See id.) 

The only relevant case cited by Visa for this proposition is Image Technical Services,

Inc. v. Eastman Kodak Co., 125 F.3d 1195, 1224 (9th Cir. 1997), in which the Ninth Circuit

determined that remand was appropriate where a jury awarded damages in a market that had

been dismissed and not adjudicated as unlawful.3 In Kodak, plaintiffs had alleged that Kodak

monopolized the market for servicing copiers as well as the market for used equipment. The

district court had dismissed the used equipment market allegations on the merits, but at trial,

when the jury found for plaintiffs on the services market claim, they awarded damages suffered

in the used equipment market. Id. at 1223. On appeal to the Ninth Circuit, plaintiffs argued

that the court should assume the jury concluded that plaintiffs had been harmed in the used

equipment market from Kodak’s monopolization of the services market, rather than Kodak’s

lawful conduct in the used equipment market. Id. at 1224. The court correctly rejected the

argument, and held that plaintiffs at trial were required to “segregate damages attributable to

lawful competition from damages attributable to Kodak’s monopolizing conduct” and therefore

remanded for a new trial on damages. Id. at 1224 (“the issue presented here: disaggregation of

damages attributable to different acts and suffered in different markets.”) Although the court

noted that “conduct found anticompetitive in one market may not be anticompetitive in another

market,” the court did not find as a matter of law that plaintiffs could not recover damages in

the used equipment market if they were proven to be attributable to Kodak’s conduct in the

services market. Id. 

Should it pursue recoupment of damages in the form of overpayment of interchange fees

and lost profits in the network processing market as an intraprocessor as well as damages

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suffered in its role as an acquirer, First Data will have to demonstrate at trial that its harm in its

role as acquirer was precipitated by some unlawful conduct in the network processing market. 

However, the Court cannot conclude as a matter of law that such proof is barred. As currently

alleged, First Data’s damages in its role as an acquirer are incidental and directly related to the

limitation on competition for network processing services.

The Court finds the Supreme Court’s decision in McCready instructive. In McCready, a

group health plan subscriber who was not reimbursed under her plan for psychotherapy

provided by psychologists rather than psychiatrists, brought an antitrust class action against her

health insurer, Blue Cross, and an organization of Virginia psychiatrists. McCready, 457 U.S.

465. The Supreme Court held that although the alleged conspiracy was directed at

psychologists and not at subscribers to group health plans, an individual subscriber who

suffered damages as the result of the plan’s concerted refusal to reimburse could pursue a

remedy under Section 4 of the Clayton Act. The Court held that the alleged harm suffered by

subscribers was “the very means by which it is alleged that [the plan] sought to achieve its

illegal ends.” Id. at 479. Although the plan argued that the market, for purposes of the alleged

conspiracy, was the market in group health plans, the court rejected this construction and held

that the individual’s claim of injury stemmed from her position as a consumer of psychotherapy

services entitled to financial benefits under the plan. Id. at 480. The court held that “we think it

clear that McCready was ‘within that area of the economy . . . endangered by [that] breakdown

of competitive conditions’ resulting from Blue Shield’s selective refusal to reimburse.” Id. at

480-81. 

Similarly, here, the Court does not find that First Data is barred from recovery of

damages allegedly suffered in its position as an acquirer because it has alleged a conspiracy to

monopolize in the market of network processing. Such damages, if any, suffered in its role as

an acquirer are incidental to such alleged monopolization. The holding in McCready permits

restraint in one market and resulting, incidental damages to a player in another market. The

alleged damages in the form of overpayment of interchange fees are precisely the type of

damages caused by the alleged restraint in the alleged operative market. Therefore, Visa’s

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motion for partial summary judgment on the issue of damages outside the relevant market is

DENIED.

D. First Data’s Attempt at Monopolization Claim in the Debit Market.

To prevail on an attempt to monopolize claim, First Data must establish “(1) a specific

intent to control prices or destroy competition; (2) predatory or anticompetitive conduct directed

at accomplishing that purpose; (3) a dangerous probability of achieving ‘monopoly power,’ and

(4) causal antitrust injury.” Rebel Oil Co. v. Atlantic Richfield, Co., 51 F.3d 1421, 1434 (9th

Cir. 1995). Therefore, in order to prevail on its attempt to monopolize claim, First Data must

demonstrate that there is a “dangerous probability” that Visa’s challenged conduct will increase

its power in the putative relevant market. Visa argues that with regard to the entire debit card

market, even accepting First Data’s analyses as true, its ban on intraprocessing would result in

the greatest increase of market share of a mere .2 percent, from 53.7 percent to 53.9 percent of

the debit market. Visa thus argues that this slight increase in market share does not amount to

evidence that Visa’s actions created a dangerous probability that it would obtain or achieve

monopoly power in the debit market. (Motion at 21-22.) Visa argues that this minimal increase

in market share is insufficient as a matter of law to demonstrate a dangerous probability of

achieving monopoly power.

In Rebel Oil, 51 F.3d at 1438, the appellate court found the district court had erred by

finding that a 44 percent market share was insufficient as a matter of law to give ARCO market

power. The court found that “market share of 44 percent is sufficient as a matter of law to

support a finding of market power, if entry barriers are high and competitors are unable to

expand their output in response to supracompetitive pricing.” Id. The court commented that

courts should be reluctant to apply bright-line rules regarding market share in deciding whether

a defendant has market power: “Courts should be ‘wary of the numbers game of market

percentage’ when considering attempt-to-monopolize claims.” Id. at 1438 n.10 (citations

omitted). The court found that the far wiser approach is to determine fully the issue of market

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 Visa relies on a case from the Tenth Circuit, Colorado Interstate Gas Co. v.

Natural Gas Pipeline Co., 885 F.2d 683, 694-95 (10th Cir. 1989), for the proposition that an

increase from 41 to 54 percent of market share was insufficient to demonstrate an attempted

monopolization claim where there was no chance of illegally increasing the market share

beyond that point. The court held there that because of a limitation in contractual rights,

there was no dangerous probability that the accused party could infiltrate the market with

sufficient market share to be a monopolist. Id. at 695. The court specifically found that the

“necessarily limited scope of the [accused attempted monopolist’s] objective leaves no room

for speculation about the probability that [its product] would gain a monopoly.” Id. Here, in

contrast, it is not undisputed that Visa’s market share of the entire debit market and therefore

its percentage share of the network processing market for debit transactions could increase

past the current levels. Therefore, the Colorado Interstate opinion is readily distinguishable

on the facts.

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power “by carefully analyzing certain telltale factors in the relevant market: market share, entry

barriers and the capacity of existing competitors to expand output.” Id. (citations omitted).4

As a preliminary matter, First Data disputes the factual premise of Visa’s argument. 

First Data contends that Visa’s own documents evidence that, without the ban, it estimated the

loss of the share of intraprocessing of Visa transactions at anywhere from 15 percent to 44

percent. (See Shah Decl., Ex. E at VUFD0000459; Ex. P at VUFD0287036; Ex. Q at

VUFD0464228.) In addition, First Data contends that Visa’s market share of the entire debit

card market is increasing over time. (See Edlin Decl., ¶ 28, SACC, ¶ 112, and Opp. at 23

(asserting that Visa’s market share has increased from approximately 54 percent to closer to 60

percent overall).) Therefore, there is significant factual dispute regarding the overall market

share gained by Visa by virtue of its conduct in enforcing the ban on intraprocessing. 

Further, First Data argues that there are disputed issues of material fact regarding Visa’s

market power (as opposed to merely market share), including entry barriers and the limitations

on competitors’ capacity to expand. “Barriers to entry may be defined as either ‘additional

long-run costs that were not incurred by incumbent firms but must be incurred by new entrants,’

or ‘factors in the market that deter entry while permitting incumbent firms to earn monopoly

returns.’” Los Angeles Land Co. v. Brunswick Corp., 6 F.3d 1422, 1427-28 (9th Cir. 1993). 

First Data points to the findings of the decision in United States v. Visa, Inc., 163 F. Supp. 2d

322, 340-42 (S.D.N.Y. 2001), in which the district court determined that Visa had market power

in the general purpose card network services market. First Data contends that potential

competitors in the market in both credit and debit transactions face the same obstacles to entry

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into the market for processing the transactions that result from those cards. (See Opp. at 23

n.17.) In addition, First Data points to the report of its economic expert who finds that entrants

in the network processing market face substantial barriers to entry. (See Edlin Decl., Ex. B at ¶

170.) The Court cannot find as a matter of law that there is no dispute of material fact regarding

the possibility that Visa, by virtue of its allegedly anticompetitive conduct, maintains market

power by creating a marketplace with substantial barriers to entry. 

Lastly, the Court finds there is a dispute of fact regarding whether Visa maintains

substantial power over price in network processing for debit transactions by preventing First

Data from expanding its network processing of Visa transactions and prohibiting others from

entering the market. First Data points to its economic expert’s declaration for the proposition

that Visa maintains price control by enforcing its ban on intraprocessing of both credit and debit

card transactions. (See Edlin Decl., ¶¶ 13, 14, 25, 29.) The Court again cannot find as a matter

of law that this evidence does not create a dispute of material fact regarding Visa’s market

power over the relevant putative market. First Data will bear the substantial burden of

demonstrating to the jury that Visa possesses market power by virtue of not only its large

market share, but also by creating barriers to entry and maintaining substantial power over price

in network processing. But, at this procedural stage, the Court cannot rule that there is no

dispute of fact. Therefore, Visa’s motion for partial summary judgment on First Data’s third

cause of action for attempt to monopolize the debit card network processing services market is

DENIED.

E. Other Challenged Acts. 

Visa also challenges the allegations in the Second Amended Counterclaim relating to:

(1) Visa’s Merchant Direct Exchange Program (MDEX); (2) Visa’s filing of this lawsuit; 

(3) Visa’s Member Call Program; and (4) Visa’s requirement of post-edit logs for arbitration. 

Essentially, Visa argues that each of these allegations in the counterclaim fail to constitute an

independent antitrust violation and therefore requests summary judgment of each. 

Visa’s attempt to segregate these individual allegations from the overall allegations of

competitive conduct is improper. Visa’s arguments unfairly parse First Data’s allegations. 

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Parties “should be given the full benefit of their proof without tightly compartmentalizing the

various factual components and wiping the slate clean after scrutiny of each. The character and

effect of a conspiracy are not to be judged by dismembering it and viewing its separate parts,

but only by looking at it as a whole.” Continental Ore, 370 U.S. at 699 (citations omitted).

[I]t would not be proper to focus on specific individual acts of an accused

monopolist while refusing to consider their overall combined effect. At the

same time, if all we are shown is a number of perfectly legal acts, it becomes

much more difficult to find overall wrongdoing. Similarly, a finding of some

slight wrongdoing in certain areas need not by itself add up to a violation. We

are not dealing with a mathematical equation. We are dealing with what has

been called the ‘synergistic effect’ of the mixture of the elements. 

City of Anaheim v. Southern California Edison Co., 955 F.2d 1373, 1376 (9th Cir.1992) (citing

City of Groton v. Connecticut Light & Power Co., 662 F.2d 921, 929 (2d Cir.1981)). Visa’s

challenge by moving for summary judgment on the separate acts as alleged by First Data in its

amended counterclaim is improper. Each claimed fact is not a separate cause of action for

antitrust violation, but, taken together, the allegations amount to valid claims. The Court cannot

determine as a matter of law the character of the overall charges of monopolistic conduct by

segregating the alleged conduct into separate, individual acts. On this basis, Visa’s motion for

summary judgment on the four individual acts as alleged in the counterclaim is DENIED.

CONCLUSION

Having received the Court’s decision on this last in a series of motions for summary

judgment, as agreed by the parties at the case management conference held by this Court on

December 9, 2005, the parties are HEREBY ORDERED to attend further mediation with Judge

Eugene F. Lynch to be completed by no later than 30 days after receipt of this Order. Should

the parties or the mediator require further time to complete mediation, upon a showing of good

cause, the Court would be amenable to an extension of time. 

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In the event such mediation proves fruitless, however, the Court HEREBY SETS the

following dates:

• Pretrial submissions shall be due on December 15, 2006;

• Pretrial conference shall be held on January 16, 2007 at 2:00 p.m.;

• Jury selection shall commence on February 7, 2007 at 8:30 a.m.;

• Jury trial shall commence on February 12, 2007 at 8:30 a.m.; and

• The parties’ internal deadlines shall flow from the pretrial conference date as

ordered at the case management conference.

IT IS SO ORDERED.

Dated: May 12, 2006 

JEFFREY S. WHITE

UNITED STATES DISTRICT JUDGE

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