A Wyoming based company is suing Visa, JPMorgan and Capital One on allegations of antitrust practices. These companies are known as the top players in both credit and debit card industries. Their products have excellent ratings both as domestic and as the best international debit cards.
The Black Card LLC claims that the banking giants conspired to get control over the market of very affluent cardholders. The trial is based on claims regarding the violation of the Sherman Act.
The primary product of Black Card LLC, a Wyoming based company launched in 2007 was a card designed for consumers with above excellent credit ratings. Rebranded as Luxury Card, it offered MasterCard Titanium/Black/Gold.
Representatives of Black Card claim that the unfair market practices are almost a decade old. They blame the three giants for creating a fake partnership with them designed just to hinge the success of the product and ultimately to have a negative impact on their profits. Through this association, the accused parties could get insights about the product, the marketing strategy and gain control over the launch schedule and the relationship with customers.
The accusation list includes examples of non-competitive practices by Visa. The first move is paying JPMorgan $200 million as marketing incentives to help launch Chase Sapphire, a direct competitor of the Black Card. Visa has also been accused of spending $150 million as an investment in Capital One’s Venture Card.
It is supposed Visa made these strategic investments since JPMorgan and Capital One are long-standing and trusted partners and would potentially serve Visa’s interests better.
The center point of the allegations is that Visa had a misleading marketing agreement with Black Card, paying them only a fraction ($120,000) compared to what they were paying the other accused parties. The object of the contract was to get control over the trademark “Black Card” ensuring they were the only organization able to use the name. Although Visa representatives reassured the plaintiff’s management this was standard business practice, Black Card felt deceived.
Under these circumstances, Black Card was forced to migrate towards the MasterCard network causing significant losses and disruption in their business. Numbers show that they have lost up to 10% of their client base. The time and money previously invested in the ‘Visa Black Card’ brand still need to be recovered. Two other products that the plaintiff planned on releasing under the Visa agreement were never launched, causing additional harm to expected profits.
The scheme became apparent when Visa’s CEO Scharf resigned without proper justification and was replaced by a board member. The lawsuit contains details about the conspiracy and the way the plaintiff’s product would be annihilated by the competitor’s.
Black Card also claims that the accused group’s offers for top-tier clients were inferior to those provided by their company. They even compare their Airfare redemption rate to that of JPMorgan Chase on their website.
It remains to be seen if Black Card’s accusations towards the major players of their intention to derail the business and keep the affluent card market only for themselves will hold true.