US: Wal-Mart sues Visa for swipe-fees

Wal-Mart has officially filed its anticipated lawsuit against Visa over allegations the credit card giant colluded with banks to fix swipe-fees, after Wal-Mart was one of dozens of retailers to opt-out of a settlement offered by Visa and MasterCard over the claims.

According to reports, Wal-Mart’s lawsuit claims damages reach as high as $5 billion.

The credit card companies offered a $7.25 billion settlement to retailers that were part of the lawsuit against the interchange fees, charged to stores every time a consumer uses a card to pay. But many major merchants decided to opt out of the settlement, claiming it was insufficient to address their concerns.

In a statement, Wal-Mart said that the company “and all other merchants were subjected to rules and practices that harmed competition, suppressed fraud preventing technology in the US, and inflated interchange fees charged to merchants when customers used their credit and debit cards.”

According to reports, Wal-Mart claims Visa hiked swipe fees by 234 percent between 1998 and 2006, leading to $350 billion in excess profit for the card issuers.

Visa filed its own lawsuit against Wal-Mart last June following the store’s rejection of the swipe fee settlement offer. But according to Global Economics Group Chairman David Evans, Wal-Mart and the other retailers that opted out of the original settlement should have taken the offer, on the advice of US District Judge Gleeson, who is presiding over the case.

“As directly as [Gleason] could say in the context of a settlement decision, he told the merchants that their antitrust lawsuit on interchange fees was a dud – take the money, folks, and be happy,” Evans told Pymnts.com.

The government’s case

Wal-Mart’s lawsuit against Visa comes on the heels of a US appeals court decision last week that upheld the Federal Reserve’s proposed rules for the swipe-fees that capped the charges at 21 cents per transaction.

The decision was a blow to merchants, which argued that cap was still too high.

The Fed was met with backlash when it established the fee caps in 2011. But last Friday, the US Court of Appeals for the D.C. Circuit backed the agency, deciding that the law contained a level of “ambiguity” that allowed regulators to set such a limit on interchange fees.

”Because neither agencies nor courts have authority to disregard the demands of even poorly drafted legislation, we must do our best to discern Congress’s intent,” the three-member panel wrote.

The Fed will be told, however, to explain more thoroughly why it set the cap at the level it did. The Fed was sued by various retailers in 2011 over its rules, which arose after lawmakers created the 2010 Dodd-Frank law, hoping to lower interchange fees. Critics of the Fed’s cap say the 21 cent limit is still higher than Congress intended when it wore the law.

Interchange fees in Europe

Meanwhile, EU officials have also taken on the debate of interchange fees. Reports say earlier this week a last-minute amendment to recent interchange fee legislation has been added that would include commercial cards in a proposed cap.

Visa and MasterCard will be required to cap their interchange fees to 0.3 percent on cross-boarder transactions, but commercial cards were not included under the proposed law.

Now, credit card giants are warning corporate clients that the last-minute changes to include their cards could also lead to caps of 0.3 percent, down from 1.5 percent, on transactions.

The European Commission had deliberately left out commercial cards from its draft proposals, introduced in July 2013, to cap such interchange fees a 0.3 percent for credit cards and 0.2 percent for debit cards. But the European Parliament’s Economic Monetary Committee removed the exemption last month, reports say.

The European Parliament is set to debate the proposed amendment on April 2, according to reports.

Full Content: Pymnts.com, The City Wire, Reuters and Business Travel News

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