Internet Billing Co. (iBill) is cooperating with a U.S. Justice Department probe into whether iBill and other unnamed billing companies violated both anticompetitive behavior rules and credit processing rules for Internet payment service providers (IPSPs), the latter handed down by Visa International last fall.
"They're not suing," iBill senior vice president for marketing Cathy Beardsley told AVNOnline.com. "They've just made an inquiry, and into several other billing companies as well. And it's really just to provide them information regarding the announcement of the Visa/IPSP regulations rolled out last September."
Beardsley said part of the probe involved iBill now being considered something of a public company, since their acquisition in March by Penthouse International, which bought iBill from InterCept.
"It's just really an inquiry, because it pertained to a small business segment," she said. "IPSPs, there's really only a few of us out there. And they're just asking for paperwork and documentation, and it's just an inquiry at the moment. We're providing them with as much information as they need and have requested about the process."
Representatives of the Justice Department's Antitrust Division and of Penthouse International did not return calls for comment to AVNOnline.com before this story went to press. But Beardsley also said iBill does not expect litigation to ensure as a result of this inquiry. "I don't believe so," she said. "[Billing and processing companies] all have the same issues, but us being part of a public company now, we have to disclose some of these issues."
Citing a Penthouse International filing with the Securities and Exchange Commission, the San Antonio Express News had reported early May 7 that Penthouse said Justice asked iBill and two unnamed competitors to give information regarding one-time fees they charged merchants "as a surcharge on newly imposed Visa registration fees," introduced last September.
Visa had also announced a new chargeback rate for IPSPs, a rate of one percent (down from 2.5 percent) for domestic transactions, and 2 percent (down from 2.5 percent) for foreign transactions.
A Penthouse International filing with the Securities and Exchange Commission said the company is cooperating with the Justice probe. The filing also said Penthouse is withholding payments to InterCept, which sold iBill to Penthouse in March, until questions over reimbursing a former iBill client for "certain third party costs, including MasterCard fines" - questions raised by the former client's attorney in an April letter Penthouse reported in the filing - are resolved.
"The letter claims that iBill did not properly allocate among iBill clients certain third party costs, including MasterCard fines, and, as a result, clients of iBill may have paid a disproportionate share of such costs as passed on by iBill," Penthouse International said in the filing. "The letter also sets forth the parties' intention to file a lawsuit and seek class action status unless satisfactory payment arrangements can be made immediately. The damage claims in the letter are unspecified, but indicate a potential value of eight figures. The alleged events occurred in 2003 and are pre-closing liabilities for which Intercept is obligated to indemnify us."
Beardsley said those issues would be worked out between InterCept and Penthouse, "since it took place prior to the sale," and otherwise could offer no further comment.
Penthouse in the SEC filing said iBill is indemnified by InterCept "for certain pre-closing liabilities for InterCept or iBill," and that because damage claims could "significantly exceed the approximately $3.8 million amount claimed by InterCept under the Purchase Agreement, we have taken the position that until a potential outcome is determinable or InterCept posts adequate collateral to secure its indemnification obligations, we will withhold payments under the Purchase Agreement."
Penthouse also said in the SEC filing that there could "be no determination" as to whether the Justice probe would turn into litigation or other regulatory action.
