Walmart Sues Visa Claiming Card Transaction Fee Fixing

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Walmart Sues Visa Claiming Card Transaction Fee Fixing
Robin Beck, AFP/Getty Images
By Andrew Harris
and Christie Smythe


Walmart Stores sued Visa for allegedly conspiring with banks to fix transaction fees, the latest salvo of a multiyear legal fight between retailers and card issuers.

The world's biggest retailer seeks at least $5 billion in damages for what it claims are violations of federal antitrust laws that could triple that sum.

Walmart (WMT), one of dozens of large merchants that dropped out of a nationwide, multibillion dollar antitrust settlement with Visa (V) and MasterCard (MA) to pursue their own lawsuits, filed its complaint in federal court in Fayetteville, Ark., on March 25.

"Visa's monopoly power has enabled it to dictate price and inhibit competition," Walmart said in its complaint.

The settlement Walmart withdrew from, initially valued at $7.25 billion, was approved by a Brooklyn, New York, federal judge in December. It's now worth about $5.7 billion after reductions for the merchants that bowed out.

Visa sued the Bentonville, Ark.-based retailer in June to try to stop it from bringing its own case, saying in a complaint filed in Brooklyn that it sought to prevent "the continuation of endless, wasteful litigation between the parties."

Paul Cohen, a spokesman for Visa, declined to comment on the Walmart complaint.

'Enormous Damage'

Walmart claims the card company's conduct caused it to suffer "enormous damage" from January 2004 to late November 2012. %VIRTUAL-article-sponsoredlinks%No banks are named as defendants in the case.

Walmart objects to the requirement that retailers who want to accept any payments via Visa honor all issuers' Visa-branded cards.

"There is no competition because merchants are prevented from realizing the price-reducing benefits that would result if issuers competed" over the fees they charged retailers who agreed to accept their cards for payment, according to Walmart's complaint.

The settlement of the case in Brooklyn followed years of tension over interchange fees that amount to as much as 2 percent of a sale paid for with a credit card. Retailers and trade associations opposed to the accord contended it didn't pay enough in damages and unfairly blocked all U.S. merchants from suing over fees in the future.

Major League Baseball's Minnesota Twins also dropped out of the settlement with Visa and MasterCard.

'Bloated Prices'

The team and other Minnesota businesses filed their own complaint against the credit card firms in February, claiming they "insulated themselves and their members from competition that would drive down the bloated prices plaintiffs have paid to accept Visa and MasterCard payment cards."

Fees charged by MasterCard and Visa are "far in excess" of associated network and bank costs for processing the underlying transactions, the team alleged.

The U.S. Court of Appeals for the District of Columbia on March 21 rejected a challenge by Walmart, Target (TGT) and other retailers to federal rules governing how much banks can collect for debit card transactions, leaving in place an October 2011 rule capping the average swipe fee at about 24 cents per transaction.

While banks had objected to the limit, retailers contended that if the Federal Reserve, which set the rate, had followed the law the fees they paid on each swipe of a customer's card would have been cut more and network competition enhanced.

The case is Walmart Stores Inc. v. Visa USA Inc., 14cv5101, U.S. District Court, Western District of Arkansas (Fayetteville).

Walmart Sues Visa Claiming Card Transaction Fee Fixing

A big, bold "SALE" sign helps get people in the store, where they are likely to buy non-sale items.

Once you enter, there's the shopping cart. This invention was designed in the late 1930s to help customers make larger purchases more easily.

 

In supermarkets, high margin departments like floral and fresh baked goods are placed near the front door, so you encounter them when your cart is empty and your spirits are high.    
Flowers and baked goods also sit near the front of stores because their appealing smell activates your salivary glands, making you more likely to purchase on impulse.

Supermarkets like to hide dairy products and other essentials on the back wall, forcing you to go through the whole store to reach them.

 

    

Once customers start walking through a store's maze of aisles, they are conditioned to walk up and down each one without deviating.

Most stores move customers from right to left. This, combined with the fact that America drives on the right, makes people more likely to purchase items on the right-hand side of the aisle.

Anything a store really wants customers to buy is placed at eye level. Particularly favored items are highlighted at the ends of aisles.
 

There's also kid eye level. This is where stores place toys, games, sugary cereal, candy, and other items a kid will see and beg his parents to buy.
Sample stations and other displays slow you down while exposing you to new products.
Stores also want items to be in easy reach. Research shows that touching items increases the chance of a purchase.

Color affects shoppers, too. People are drawn into stores by warm hues like reds, oranges, and yellows, but once inside cool colors like blues and greens encourage them to spend more.

Hear that music? Studies show that slow music makes people shop leisurely and spend more. Loud music hurries them through the store and doesn't affect sales. Classical music encourages more expensive purchases.
Store size matters, too. In crowded places, people spend less time shopping, make fewer purchases (planned and impulsive), and feel less comfortable
.
Stores not only entice you with sales, they also use limited-time offers to increase your sense of urgency in making a purchase.
The most profitable area of the store is the checkout line. Stores bank on customers succumbing to the candy and magazine racks while they wait.
Finally, there is the ubiquitous "valued shopper" card. This card gives you an occasional deal in exchange for your customer loyalty and valuable personal data.
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