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TREASURER, INC. v. PHILADELPHIA NATL. BAND

March 11, 1988

The Treasurer, Inc., Plaintiff
v.
The Philadelphia National Bank and Mellon Bank, N.A., Defendants



The opinion of the court was delivered by: POLITAN

 This case comes before the Court on plaintiff's application for a temporary restraining order and a preliminary injunction. Plaintiff, The TREASURER, seeks to prevent Philadelphia National Bank [hereinafter PNB] from acquiring the assets of Mellon Bank's "CashStream" network and to ban enforcement of certain provisions of PNB's servicing agreements. TREASURER asserts numerous violations of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2. As a private plaintiff in an antitrust suit, plaintiff relies on sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15 and 26, to bring this action. Defendants contend that the plaintiff has not asserted the requisite antitrust injury, and as such, they lack standing to bring this antitrust suit. Defendant has brought a motion to dismiss for failure to state a claim upon which relief can granted. For the reasons outlined herein, plaintiff's application for a temporary restraining order and a preliminary injunction are denied and defendant's motion to dismiss is granted.

 The parties in this action operate regional Automated Teller machine (ATM) networks which compete directly against each other in New Jersey. TREASURER operates primarily within New Jersey and has approximately 72 member financial institutions. It is the 25th largest regional ATM system in the United States in number of switched transactions and 29th largest in number of ATM's serviced. Defendant Philadelphia National Bank is a national banking association with its principal place of business in Philadelphia, Pennsylvania. PNB owns and operates an electronic funds transfer service commonly known as MAC, or Money Access Service. MAC does business primarily in the states of New Jersey, Delaware and Pennsylvania and is the largest regional ATM system in the United States in number of switched transactions and is the seventh largest system in number of ATM's serviced. MAC currently services approximately 80 financial institutions in New Jersey. Defendant Mellon Bank is a national banking association with its principal place of business in Pittsburgh, Pennsylvania. Mellon Bank owns and operates an ATM network known as CashStream. CashStream transacts business principally within the states of Pennsylvania, Delaware, New Jersey, West Virginia and Maryland. It is the fourth largest regional ATM system in the United States in number of switched transactions and is the thirteenth largest in number of ATM's serviced. Currently, CashStream services 193 financial institutions, 14 of which are in New Jersey. The primary area of competition between CashStream and MAC is located in Pennsylvania and Delaware, although the two also compete in New Jersey to a small extent.

 ATM's provide many of the same services as live tellers. They allow bank customers to do many banking transactions such as make withdrawals, deposits, loan payments, transfer funds between accounts and check balances 24 hours a day without the need to see a live teller. Many financial institutions have developed proprietary, or 'in house' ATM systems which served only their own branches. ATM networks, such as MAC and TREASURER were developed to link various financial institutions so that bank customers could use the ATM of a competitor bank as long as the two banks were members of the same network. If an institution did not have the computer capacity to power or 'drive' the ATM, the regional ATM network could supply the software to drive or process the institutions system.

 The ATMs in a shared network are linked via interstate communication lines to a central computer referred to as a "switch" which operates as a clearing facility for all transactions initiated at the ATMs. This way, customers of one bank can access an ATM of another bank provided both banks belong to the same network. On a larger scale, national networks known as The PLUS system and CIRRUS evolved. These national networks linked up with regional networks and provided bank customers with national access to account information. Membership in a regional network is a useful selling device for financial institutions to their customers. It is therefore desirable even for banks with the ability to drive their own ATMs to join regional networks so that their customers can access other banks' ATMs. These banks (called intercept processors) have the ability to either process the transaction itself or relay it to the appropriate regional or national network.

 There are different transaction charges for different types of ATM services and for different levels of interconnection between ATM systems. The network switch charges the card-issuing financial institution a 'processing fee' for the provision of transaction clearing services and ATM support. In the case of a transaction entered at an ATM not owned by the card-issuing financial institution (called a foreign transaction), the network switch charges an additional fee called an "interchange fee" to the institution which owns the ATM at which the transaction was initiated. Because all members of an ATM network are charged by the switch operator based upon the same fee schedule, they generally do not compete against each other within the network on the basis of price. The price competition is generated between networks and is one factor a financial institution considers when deciding which network to join.

 There has been much confusion regarding the pricing structure of MAC. TREASURER has indicated at several points in the proceeding that MAC's fees are higher than the industry average. *fn2" The testimony has revealed that MAC charges a price which included many services that TREASURER's fees do not - a bundled charge as compared to an unbundled one. MAC's charges include switching services, daily reports, conveyance or the transmission or physical delivery of those transactions to both the ATM owners as well as the card issuers, and advertising and promotional activities which MAC engages in to increase consumer awareness. Banks which affiliate with CashStream are assessed an additional charge for services such as advertising. Currently, MAC's average switch fee is fourteen cents with a range of five cents on the low end to thirty cents on the high end. TREASURER's fees range from five to fifteen cents per transaction.

 In addition to its frontal attack on the PNB-Cashstream agreement, TREASURER also seeks to have this Court strike the restrictive language in the MAC servicing agreements which prohibit financial institutions from allowing another network to access their ATM. TREASURER allows its members to belong to more than one network so that it was possible for one bank to belong to both TREASURER and CashStream. MAC forbids its member institutions from permitting its customers from using non-MAC cards in a MAC ATM. This restriction, for all intents and purposes, imposes a "MAC only" obligation on its member institutions. It is exceedingly rare that a financial institution will issue two cards or provide two machines. *fn3"

 Private plaintiffs have standing to sue for violations of the antitrust laws exclusively under sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15, 26. Under section 4, "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 . . . ." 15 U.S.C. § 15. (Emphasis supplied). Section 16 grants the plaintiff standing to sue for injunctive relief. It states "any person, firm, corporation, or association shall be entitled to sue for and have injunctive relief, in any court of the United States . . . against threatened loss or damage by a violation of the antitrust laws, . . . when and under the same conditions and principles as injunctive relief against threatened conduct that will cause loss or damage is granted by court of equity . . . ." 15 U.S.C. § 26. (Emphasis supplied).

 These remedies are only available to a certain limited group of plaintiffs. A plaintiff must allege and prove "antitrust injury" in order to fall within the narrow class of persons who can benefit from these laws. The analysis differs from that which is undertaken when the United States is the plaintiff and a general public right of action is asserted. *fn5" Here plaintiff's injury must be tied to an antitrust injury. This is made clear by an analysis of recent Supreme Court decisions.

 In Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 50 L. Ed. 2d 701, 97 S. Ct. 690 (1977), the Supreme Court sets out what has come to be the current standard in antitrust analysis in private party litigation. In Brunswick, the Supreme Court considered whether antitrust damages were available under section 4 where the sole injury alleged was the continued existence of a competitor's business, which denied plaintiff the anticipated profits it would have derived had the competitor's bowling centers failed. Plaintiff sued for damages purportedly arising from defendant's acquisition of a number of bowling centers which were experiencing financial difficulty. These bowling centers directly competed with plaintiff and would have been eliminated from the marketplace had defendant not acquired them. Plaintiff asserted that this purchase violated section 4 of the Clayton Act because it would deprive plaintiff of the profit increases expected to result from the failure of the competitor's business. Noting that all merger transactions cause some economic dislocation but that Congress chose to forbid only those with anticompetitive effects, the Supreme Court concluded that section 4 does not provide a remedy for all economic problems resulting to private plaintiffs even from illegal mergers, but only for:

 
. . . antitrust injury, which is to say injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful. The injury should reflect the anticompetitive effect either of the violation or of anticompetitive acts made possible by the violation.

 Brunswick, supra, at 489 (emphasis in original). Citing Brown Shoe Co. v. United States, 370 U.S. 294, 320, 8 L. Ed. 2d 510, 82 S. Ct. 1502 (1962), the Brunswick Court reaffirmed that the antitrust laws protect "competition not competitors," and concluded that the plaintiff was actually complaining of the enhanced competition to result from the challenged merger. ...


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