Antitrust Probers Study Big Banks’ Role in ATM Fees

The federal government is investigating whether the nation’s largest ATM networks are violating antitrust laws by forcing member banks to charge transaction surcharge fees.

The Justice Department said Friday it is examining whether big banks, which dominate large ATM networks, are engaging in illegal restraint of trade by preventing smaller member banks from forming alliances that would eliminate the surcharges.

Banks are expected to make more than $3 billion this year from the surcharges, which are added to the fees charged by a customer’s own bank when the customer uses another bank’s ATM.

“We are looking at the possibility of anti-competitive practices relating to certain discriminatory ATM surcharge rules,” said Justice Department spokeswoman Gina Talamona. She declined to elaborate.

Civil subpoenas seeking information on the restrictive network rules have been issued to Electronic Payment Services Inc.’s MAC and other major regional ATM networks, said Stephen Mahinka, a Washington antitrust lawyer who represents MAC, the nation’s fourth-largest network. Electronic Payment Services is owned by major regional banks such as Banc One Corp. and KeyCorp.

A spokeswoman for San Diego-based Star System, the nation’s largest network, said it had not been contacted by the Justice Department.

California’s two largest banks, BankAmerica Corp. and Wells Fargo & Co., belong to member-owned Star, which operates about 37,000 ATMs in 12 Western states. The banks also said they have not been contacted by the Justice Department.

Star System defended its ban on the alliances as a nondiscriminatory rule that prohibits banks from putting a surcharge on some ATM users and not others.

“All cards should be treated equally,” said Nikki Waters, executive vice president of the San Diego-based company. “If they don’t surcharge one group, they shouldn’t surcharge all others.”

The world’s other major ATM networks are Cirrus, owned by MasterCard International, and Plus, owned by Visa International Inc. Cirrus said it has been contacted and is cooperating with the probe.

Surcharge fees have become a target for consumer advocates and federal and state lawmakers who accuse the banks of double-dipping. Consumers pay a fee that averages about $1.23 when they use an ATM--usually to get quick cash--owned by a bank other than their own. The same transaction often results in a second charge, known as an interchange fee, paid to their own bank. That fee is shared with the ATM owner.

Banks wanting to establish no-fee zones should be allowed to do it, said Ed Mierzwinski, consumer advocate for U.S. Public Interest Research Groups. “ATM machines are in the vanguard of the big banks’ strategy to get bigger and eliminate low-cost smaller competitors from the marketplace,” he said.