Pulse Network v. Visa
30f4th480
5th Cir.2022Background:
- Debit networks (PIN and signature) route transactions between merchants' acquirers and card issuers; the market is two-sided (issuers and merchants) and dominated on the signature side by Visa and Mastercard.
- Congress's Durbin Amendment requires issuers to enable at least two unaffiliated debit networks on debit cards and gives merchants the right to choose routing, prompting network responses.
- Visa implemented three contested policies: PAVD (a PINless option requiring issuers to enable Visa’s PINless tech on Visa cards), FANF (a fixed monthly acquirer charge plus reduced per-transaction fees), and volume-based routing agreements offering incentives to merchants/issuers.
- Pulse, a PIN network operator, sued Visa alleging the three policies violate Sections 1 and 2 of the Sherman Act and Texas antitrust law; the district court granted summary judgment for Visa for lack of antitrust standing.
- The Fifth Circuit reviewed antitrust standing (injury-in-fact, antitrust injury, proper plaintiff), upheld dismissal as to PAVD, reversed as to FANF and volume agreements, remanded for further proceedings, and ordered reassignment to a different district judge.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Antitrust standing re: PAVD (alleged tying / loss of exclusivity) | PAVD ties Visa PINless to its signature cards, deprives Pulse of exclusive PIN placement, and causes Pulse lost volume/revenue | Visa: PAVD increases competition; Pulse’s losses are from ordinary competition, not an antitrust injury | Held for Visa: Pulse has injury-in-fact but not antitrust injury—loss from competition/choice is not the type of injury antitrust law protects |
| Antitrust standing re: FANF (integrated fixed + per-transaction pricing) | FANF forces merchants to pay unavoidable fixed fees that Visa uses to subsidize lower per-transaction fees, foreclosing rivals and causing Pulse exclusion | Visa: Pulse is harmed only by lower per-transaction fees (procompetitive); nonpredatory price cuts don’t create antitrust injury | Held for Pulse: a reasonable jury could find FANF is an integrated, anticompetitive scheme causing antitrust injury and Pulse is a proper plaintiff; standing exists |
| Antitrust standing re: Volume-based agreements (exclusive/quasi-exclusive dealing) | Agreements lock up merchant/issuer routing, foreclose PINless competitors, and reduce Pulse’s market share | Visa: Agreements are procompetitive, short-term, terminable; merely price competition | Held for Pulse: assuming the agreements are anticompetitive exclusive-dealing, Pulse has standing; factual disputes make this a jury issue |
| Reassignment on remand | N/A (Pulse requests reassignment) | N/A (Visa opposes reassignment) | Held: Court ordered reassignment—district judge’s comments, repeated discovery denials, and procedural history created appearance of bias and likelihood the judge could not set aside prior views |
Key Cases Cited
- Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (antitrust injury must be the type of loss antitrust laws were intended to prevent)
- Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328 (antitrust standing requires more than Article III; protects competition not competitors)
- Ohio v. Am. Express Co., 138 S. Ct. 2274 (antitrust analysis must account for two-sided market realities)
- Ill. Tool Works, Inc. v. Indep. Ink, Inc., 547 U.S. 28 (definition and analysis of illegal tying)
- Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451 (antitrust analysis must reflect actual market realities, not formalism)
- Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. 104 (competitive conduct by dominant firms can be lawful; relevance to proximate causation)
- Doctor's Hosp. of Jefferson, Inc. v. Se. Med. All., Inc., 123 F.3d 301 (Fifth Circuit framework for antitrust standing elements)
- Andrx Pharms., Inc. v. Biovail Corp. Int'l, 256 F.3d 799 (excluded competitor suffers distinct antitrust injury when prevented from selling)