Wal-Mart sues Visa for $5 billion

Wal-Mart sues Visa for $5 billion after accusing the credit card company of colluding with major banks to fix transaction fee prices charged to the world’s largest retailer. The suit, which was filed in Fayetteville, Arkansas, near the retailer’s headquarters, follows Wal-Mart’s opting out of a $5.7 billion settlement with Mastercard and Visa in December 2013.

Last December a number of major US retailers raised objections to the terms of that agreement. They claimed the deal would not stop card networks from increasing card-processing fees later on, and would force merchants to relinquish their rights to sue payment networks on all future payment methods, including mobile phones and credit cards.

In June, 2013, Visa had prevented Wal-Mat from filing a lawsuit by suing Wal-Mart.

Wal-Mart sues Visa for conspiring with large banks

According to Wal-Mart, Visa conspired with major banks to unlawfully set the interchange fees (swipe fees) and up the network fees Wal-Mart and other retail outlets paid on Visa charge card transactions.

The retailer claims the inflated fees caused “enormous damage” for a period of 9 years (2004-2012) and is consequently suing Visa for more than $5 billion.

Wal-Mart alleges that Visa’s swipe fees violate antitrust regulations and have cost American retailers and consumers over $350 billion.

Visa behavior damaged Wal-Mart retail sales

Wal-Mart says:

“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.”

This is not the first time Wal-Mart sues Visa over swipe fees. In July 2012, MasterCard and Visa settled with several retailers when they paid out $7 billion and reduced their fees. Amazon, Target and Wal-Mart opted out of the settlement.

Wal-Mart contributed towards a successful $3 billion class-action settlement with MasterCard and Visa in 2003 over the two card companies’ requirements that merchants had to accept both their credit and debit card services.

Visa, which has repeatedly denied its fees are anticompetitive, has so far made no comment.

There are rumors in the US media that Wal-Mart may sue MasterCard as well, but this has not been confirmed.

Credit card security criticized

Wal-Mart is also criticizing Visa over poor card security. Data leaks in 2013 at Target Corp. and other retailers have revealed how poor US payment card security is. The US has the lowest usage in the developed world of cards with computer chips, which are much harder to manipulate by criminals compared to the current system of magnetic strips.

Wal-Mart said in the suit:

“Wal-Mart was further harmed by anti-innovation conduct on the part of Visa and the banks, such as perpetuating the use of fraud-prone magnetic stripe system in the U.S. and the continued use of signature authentication despite knowledge that PIN authentication is more secure, a fact Visa has acknowledged repeatedly.”