Wal-Mart sues Visa

March 28, 2014

The swipe fee antitrust lawsuit that The Official Merchant Services Blog has been covering for a few years now has an update: Wal-Mart, accusing Visa of excessively high card swipe fees, is suing Visa for $5 billion. The action by Wal-Mart is being taken because Wal Mart opted out of the settlement of the class action lawsuit between merchants and Visa and MasterCard.

This follows our previous report of the Minnesota Twins also opting out of the settlement. Wal-Mart filed the suit Tuesday, March 25, in the U.S. District Court for the Western District of Arkansas, where Wal-Mart is headquartered.

Wal-Mart’s Side of the Suit

Wal-Mart, the world’s largest retailer, is seeking damages from price fixing and other antitrust violations that it claims took place between January 1, 2004 and November 27, 2012.

In its lawsuit, Wal-Mart contends that Visa, in concert with banks, sought to prevent retailers from protecting themselves against those swipe fees, eventually hurting sales. Wal-Mart stated in court documents: “The anticompetitive conduct of Visa and the banks forced Wal-Mart to raise retail prices paid by its customers and/or reduce retail services provided to its customers as a means of offsetting some of the artificially inflated interchange fees. As a result, Wal-Mart’s retail sales were below what they would have been otherwise.”

Wal-Mart contends that that the way Visa set up the swipe fees violated antitrust regulations and generated more than $350 billion for card issuers over the time period in question, in part at the expense of the retailer and customers.

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Case History

The antitrust case against Visa, MasterCard and several issuing banks stemmed from the dispute relating to the percentage of credit card transaction fees that retailers must remit to the credit card processing network. The fees generally range from 1.5 to 3 percent and are shared with the bank that issued the card. Also known as “swipe fees,” these charges serve to underwrite the supporting infrastructure that allows businesses to accept and process credit cards.

Large retailers and supporting associations have repeatedly complained about the costs associated with accepting credit cards and the fees for merchant services. These grievances resulted in a number of lawsuits filed in 2005, which were eventually consolidated into a single case known as the Payment Interchange Fee and Merchant Discount Antitrust Litigation.

There were 139 parties involved as plaintiffs, and the case was active for over eight years. In July 2012, a settlement was reached that provided $6 billion in damages to affected retailers and another $1.2 billion for a temporary reduction in interchange fees. As a further concession, Visa and MasterCard eliminated certain rules for merchant services that prohibited surcharging, which is a practice that allows retailers to recoup credit card costs by passing them on to the consumer.

After a settlement was reached in the case, major retailers such as Target, Nike, Home Depot, Lowes, Starbucks and Best Buy ultimately opted out of the settlement. Major trade organizations, including the National Restaurant Association (NRA), have voiced significant opposition to the agreement. In fact, the NRA strongly encouraged its constituent members to reject the settlement and highlighted the potential negative impact it could have on the emerging mobile payments market.

The Saga

To review the full extent of this ongoing saga, you can read our previous coverage of this settlement:

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