Why would they bother though? If so many people are using their wallet and paying them, why not just keep the payments off the block chain entirely? Yes, they capture their own transaction fees, but only for cases where they could avoid a transaction fee entirely anyway.
Clever reply. I expect as much from you. Kudos.
Because offchain would not be protected against double-spend.
You are describing another way the attack could be done, to destroy the Bitcoin network by forking it, but it would probably be safer (less chaotic) to dominate the Bitcoin network instead as I have explained.
I envision the attack being invisible to the "dumb masses" customers, so you wouldn't want to be offchain then, because you lose interoperability for the customers on their coins and coin change.
Also the cartel would ramp this up over time, and not dominate initially so it is easier to insideously cancer the network than to fork, because fork requires dominating force from the start.