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Wal-Mart Sues Visa For $5 Billion For Rigging Card Swipe Fees
Hugh Pickens DOT Com writes: "Reuters reports that Wal-Mart has sued Visa for $5 billion, accusing the credit and debit card network of excessively high card swipe fees. Wal-mart 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. '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,' says Wal-Mart in court documents. 'As a result, Wal-Mart's retail sales were below what they would have been otherwise.' Interchange fees, the industry term for card-swipe fees, have been a major point of contention between retailers and banks. The fees are set by Visa and other card networks and collected by card-issuing banks like J.P. Morgan Chase & Co. Retailers have argued that the fees had been set too high due to a lack of competition with the two payment industry giants.
Wal-Mart also took a shot against Visa over payment card security. Data breaches last year at Target Corp., Neiman Marcus and others have drawn attention to the country's slow adoption of card technology that uses computer chips and PIN numbers and is seen as less susceptible to fraud than the current system of magnetic stripes. 'Wal-Mart was further harmed by anti-innovation conduct on the part of Visa and the banks,' says the lawsuit, '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.'"
Wal-Mart also took a shot against Visa over payment card security. Data breaches last year at Target Corp., Neiman Marcus and others have drawn attention to the country's slow adoption of card technology that uses computer chips and PIN numbers and is seen as less susceptible to fraud than the current system of magnetic stripes. 'Wal-Mart was further harmed by anti-innovation conduct on the part of Visa and the banks,' says the lawsuit, '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.'"
Because if Walmart wins, they will surely use the money to raise your meager wages instead of buying the CEO a new yacht.
Ezekiel 23:20
When one huge evil corporation attacks on another huge evil corporation for being evil, does it cause a rip in space time?
SJW's don't eliminate discrimination. They just expropriate it for themselves.
This is, and has long been, a huge ripoff. I'm rather sure that Walmart doesn't pay the full 3% that Visa/MasterCard like to charge for transactions, but when you look at the overhead of transactions in the cryptocurrency markets, you can see how ridiculously overpriced the credit card transactions are. The costs here are near 0, and so should the charges be, but the system is carefully crafted to avoid competition, and that's illegal.
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Because if Walmart wins, they will surely use the money to raise your meager wages instead of buying the CEO a new yacht.
Raise wages? Probably not. Lower prices? Very possibly. Walmart competes primarily on price so anything they can do to lower costs tends to get at least partially passed on to customers in order to keep their competitive advantage. A lot of companies would pocket the savings but in this particular instance it might actually end up benefiting customers.
Plus Walmart beating up Visa on price is almost certainly going to benefit consumers in the long run and Walmart is big enough to actually succeed. The cost of credit card swipe fees gets rolled into the prices we pay for products so if they get lowered at least some of that money will flow through to us as end customers. Not all of course but definitely some.
Bitcoin might be a bit extreme, as most of their customers have no idea what it is, but why not encourage customers to use cash then? Make some checkout lines cash only. If you want to pay with Visa, you get the slow line. Give customers a cash discount. Visa tries to make people not pay extra for using their card, but I've seen plenty of businesses get around the rules by offering cash discounts.
Anthropic principle: We see the universe the way it is because if it were different we would not be here to see it.
Is there any way they can both lose?
Whilst I know chip and pin is not fool proof, I was shocked to hear the US is still swiping cards for payments!
"despite knowledge that PIN authentication is more secure"
Visa's probably thinking about all the people who can't seem to remember their PINs and afraid of losing sales from those people.
Coder's Stone: The programming language quick ref for iPad
I was thinking the same thing, install an experimental "bitcoin checkout line". It would probably be too confusing for 99%+ of their customers though.
Walmart made $13bln US in profits last year ... half of which accrues to the Walton "family."
'The anticompetitive conduct of Visa and the banks forced Wal-Mart to raise retail prices paid by its customers ...
Anti-competitive? Hypocrites.
Maybe Walmart is just being stupid. Did they ever consider that? My swipe fees are zero. I pay $21 flat per month to the processor and then exactly what the card costs so if visa wants 0.8% on a debit card, that's what I pay. Maybe they should have gotten a plan that doesn't suck.
Even after the rebranding, the company's legal name is still "Wal-Mart Stores Inc.". So Wal-Mart the company operates Walmart the store chain.
I'm rather sure that Walmart doesn't pay the full 3% that Visa/MasterCard like to charge for transactions
No, they don't in a lot of cases but the amount they do pay is VERY substantial. We're literally talking about billions of dollars here no matter what exact amount Walmart pays.
but when you look at the overhead of transactions in the cryptocurrency markets, you can see how ridiculously overpriced the credit card transactions are. The costs here are near 0, and so should the charges be
The cost of credit card transactions are nowhere near zero. Transaction processing in any form is not cheap, even at high volumes. There are significant costs for both on the front end (credit card machines + computers + accounting + banking fees), and on the back end (computers, customer service, accounting, security (yeah, ironic I know), billing, payment transaction costs, marketing, and more). While I agree completely that credit card companies overcharge, the assertion that their costs are anywhere close to zero is not supported by the facts. Building a payment infrastructure like the one Visa has costs many billions of dollars to build and more billions to operate on an ongoing basis.
Furthermore if you are going to make the absurd comparison between bitcoin and credit cards, you need to account for ALL the costs including currency exchange fees, exchange rate risk, opportunity cost, infrastructure cost (which bitcoin lacks), customer service (which bitcoin lacks), counterparty risk (no one is going to give you a refund), accounting, and the rest of them. Once you account for what bitcoin really costs and what it lacks, the cost of it is actually higher in most cases on a risk adjusted basis. (and if you aren't accounting for risk then you are being really really foolish)
If you want Walmart's profits to go to you, buy WMT.
I feel so weird saying this... But, Go Walmart? I guess.
Anyway, as another poster pointed out it's about time someone went after them. Maybe taking 5 billion from them will be a real wake up call.
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Bitcoin payments in the store would require Wi-Fi in the store, which is something with which our local Walmart has experimented but which it ended up terminating. Or it would require pairing the user's tablet to the register's Bluetooth transceiver each time, which might work for a dedicated kiosk to exchange BTC for gift cards but could hold up the queue of guests if used for actual groceries.
Since the middle class has been decimated, this is how business of the future will run... now that they've fleeced the rest of us, big companies will sue other big companies and that's their ticket to profitability and stock price rises.
If telephones are outlawed, then only outlaws will have telephones.
When and if Walmart and Amazon accept the Bitcoin, it is then a viable currency.
Happiness in intelligent people is the rarest thing I know.
Ernest Hemingway
Discounts for cash, or also charging more for using credit/debt is illegal is many states.
When you cant win, ad hominem.
The settlement, assuming this article is accurate, includes a broad ligation release that will basically shield the credit card companies from getting sued in the future. So essentially they are giving a token amount to this settlement and getting a huge litigation release that will allow them to continue to screw people essentially forever. I'd opt out of this class if it was me. Walmart, Target and Amazon have all opted out. Hopefully they will all sue individually and force a reasonable outcome this time. Depending upon how this goes Walmart may be doing us all a favor here by trying to force a better settlement.
This is just another example that reinforces my view that class action lawsuits are basically a scam. I have been involved in two where I actually joined the class and in both cases the company being sued and the lawyers came out just fine and the people in the class got pretty much nothing. I had two other instances where I qualified and I just opted out. Not surprisingly those cases also involved making lawyers rich while the people in the class got nothing. In this case the class members are getting next to nothing and giving up a hell of a lot to get it. Can't say I am surprised.
"Wal-Mart employees are the largest group of .. food stamp recipients"
If i remember correctly that kind of law were thrown out by the supreme court because of anti-trust violations. Further more, local merchants (especially in ethnic neighborhoods) have already giving discounts (by waiving sales tax and credit card fees) if you pay in cash.
New Economic Perspectives
In the UK if you tried it you'd be turned away. We have no fallback.. If your chip doesn't work/is missing you don't have a valid card.
Expect your travel insurance, extended warranty protection, points, cash back, and other credit card features to dry up rapidly if interchange fees are reduced. These perks that have been built up over the years are not free, they are paid for by interchange fees.
Now, they likely do have some valid complaints here.
But bitching about a slow transition away from magnetic stripe cards when *you are one of the last retailers to install NFC payment terminals* and more importantly *knowingly skipped the start of migration during your last payment terminal upgrade cycle* is bullshit.
Now, I can understand if maybe Walmart were just at the wrong point in the upgrade cycle and hadn't upgraded their terminals in years, but I know for a fact that nearly every Walmart I've been to in the last year has upgraded their terminals in that time period and, despite many of their competitors having NFC payment terminals for a few years, Walmart did *not* upgrade to terminals that were capable of anything but magswipe.
Target appears to have deployed terminals that look NFC-ish but aren't, and did so before the NFC rollout started and hasn't done another deployment since then, so they do have an excuse.
retrorocket.o not found, launch anyway?
I'm not particularly fond of Wal-Mart. However, as a merchant who suffers the whims of credit-card company policies, I'm really glad to see someone beating up on VISA. As another poster said, Wal-Mart might just be big enough to succeed.
I would love to see a group of large merchants get together and pick one credit card company (let's say MasterCard) and simply refuse to accept it unless security is improved. Yes, customers would complain, but if the merchants spun it correctly as trying to improve customer security and reduce identity theft, I think MasterCard would cave. Then move on to VISA.
Good. Fallback in case of security is just another word for insecurity.
I wonder if the lawsuit is really driven by the second part of the summary.
I can picture the Wal-Mart lawyers saying, "Hey Visa, if you helped underwrite and expedite the Chip & PIN card hardware and software transition, this big nasty lawsuit would go away." They may have already said the same to MasterCard in a less public way. Or maybe they asked both Visa and MasterCard to help on the transition, and MasterCard said yes.
- speaking only for myself, as always
actually the visa fees are usually transparent to the customer, and every company i've ever known pays them out of their profits, which is why some smaller stores once upon a time charged a fee for credit card transactions... So the visa fees impact their bottom line. The credit card fees are also a major factor in the number of stores issuing their own credit cards,
I recently returned from the UK, with nothing but my mere magnetic strip AMEX card. I had no problem using it at hotels, restaurants, theaters. Perhaps they are a bit more accepting of the old school card within city centers.
Little travel tip that I, as a Canadian, learned years ago entirely by chance.
If you encounter this security system in the US (still mostly as gas pumps) - 99.5% of pumps will allow Canadians to use a "zip code". Take the first 3 numeric digits in your Postal Code, and add "00" to the end, making a 5 digit "zip code". Works like a charm almost every time. I've only had it fail once. And they do actually use this as a security code, I've tried 55555 and 90210 and nothing else will work. But this one does.
I'm stunned that this little tidbit isn't all over the Canadian news, considering how many of us travel to the US (especially in our cars!).
Endless arguments over trivial contradictions in books written by ignorant savages to explain thunder in the dark.
I enabled 2FA* for my accounts on multiple crypto-currencies exchanges. I enabled 2FA for my Blizzard account. I also have 2FA for my PayPal account.
But my bank doesn't even support 2FA and neither does VISA.
Funny how the big guys who handle real currencies (aside from PayPal), have less securities in place than the others.
* two-factor authentication
Get free satoshi (Bitcoin) and Dogecoins
They should accept it for online purchases but it's too slow in a store line.
Peter predicted that you would "deliberately forget" creation 2000 years ago...
I'm not a huge Walmart fan, but I'm a bit surprised they don't just bring their own card to the market, then. They wouldn't even have to be terribly competitive, just anally rape you just a little less than the other credit card companies. The money they'd save on transaction fees in their own stores alone would probably more than cover the cost of the venture.
I'm trying to teach myself to set people on fire with my mind... Is it hot in here?
Undoing moderation to post this (sorry) but I have first hand knowledge of this having worked in merchant payment processing and setting up these accounts and terminals for customers. The standard VISA contract prohibits you from charging more for card purchases, however you are totally allowed to offer discounts for cash. You can not market the card as costing more (say, posting a sign saying 3% upcharge for VISA customers) but you are completely welcome to post a sign saying 3% discount for paying in cash, using a loyalty card, showing up dressed as a chicken, or whatever. Promotions and discounts are fine and are considered marketing events - "upcharging" VISA customers is not allowed and considered a penalty to customers. As long as you market correctly you're in the clear. VISA's business manual even has examples of this in their do's and do not's section.
These local merchants (gas station and minimarts) providing a cash discount are one breaking the law and most likely are cooking the books, Owner pulls 10-30% of the cash sales out of the registrar each night and void the cash sales off the books in a orderly fashion, make the CC/Debit Card and 90-70% of the cash sales less profitable. They understate their cash sales and put the 'merchandise loss' as theft or spoilage. A select few small businesses cook the books to avoid both local and state sales and income taxes, and have 'big shrinkage losses' to offset there reported income. After servicing that industry for a while I can tell you the only correct accounting at your locally owned gas stations is the lottery tickets. Fountain drinks unless your looking at a very modern machine are on the honor system and are a place to hammer the accounting. You will note the locals are slowly disappearing because there is no skim to speak of now that we are approaching 70% CC sales at most stations but some enterprising individuals are using cash back from EBT 'purchases' (conversion) to fill in the gap. These businesses are sold/traded between foreign aliases every 18 months because state tax authorities are slow and lazy, and the locals are on the take or political fundraiser ticket buyers club.
I still can't figure out what Walmart is suing over. How are they being overcharged?
I swear to God...I swear to God! That is NOT how you treat your human!
Hrm. I'm glad someone is finally stepping up to confront the assholishness of the credit card processors and their crazy fees. But I just voted for Walmart in the Worst Company in America tourney at http://consumerist.com/tag/wci.... I'm starting to think I should have picked Abercrombie & Finch instead.
Scott
"Hokey religions and ancient weapons are no match for a good blaster at your side, kid."
A 10-20 minute wait for confirmation is too long for checkout but just fine for a gift card vending machine. The guest comes in and spends BTC at the kiosk and is issued a gift card with no value on it. Then the guest pockets the gift card and goes shopping. Once the kiosk determines that the transaction has stuck, it credits the gift card with the corresponding USD value. By the time the guest picks out groceries and gets to the checkout, the gift card has become ready for use.
These local merchants (gas station and minimarts) providing a cash discount are one breaking the law and most likely are cooking the books,....
When did cash discounts become illegal? In almost any business you can offer cash over credit and get a discount. There is no law that says you have to actually pay the advertised price or that the merchant must collect the advertised price.
It all starts at 0
Walmart has a point. CC transactions costs for a store are ridiculous. If you have a 'rewards' based card, the store gets charged a slightly higher rate then using a card without rewards attached to it. Debit based transactions are usually lower then credit transactions because they charge a flat rate for the transaction instead of a percentage of the sale. In Europe the transaction rates are ridiculously low compared to the US. Here a MC/Visa transaction is anywhere from 1 to 2 percent of the sale. In France it is anywhere from 0.22 - 0.45%. Smaller merchants, those that do not have the volume to negotiate usually pay a much higher percentage then a place like Walmart. Visa uses fraud as the main reason on why the rates are so much higher. Going to EMV cards would solve a lot of the fraud issues, but the issuers are fighting it tooth and nail because the cost to make a EMV card is 38 cents versus 14 cents. An entire industry has been formed because of fraud and it costs software developers a ton of money just to be 'certified' so they can follow the standards that Visa has laid out. Going EMV would all but eliminate the need for PCI and probably make the entire industry obsolete, which is another reason why they are fighting it so much. I really hope that Walmart wins this case and others follow suit. Maybe it will force Visa to finally adopt standards that will lower the cost of doing business as well as protect us from fraud in the future.
It doesn't help that the sign is typically "WAL*MART"
You're probably thinking of the 2011 Visa/Mastercard settlement, which explicitly allows variable prices based on form of payment. Not every state was involved in that lawsuit though, and there may very well be some that prohibit it.
Maybe Walmart is just being stupid. Did they ever consider that?
Walmart is many things but stupid is not among them.
My swipe fees are zero.
No they are not. They might be rolled in with some other charge but you aren't getting it for free. If you pay a flat fee per month then you do a good approximation of zero transaction volume.
Maybe they should have gotten a plan that doesn't suck.
Walmart has more negotiating power than pretty much any retail firm on earth and they squeeze every dime of cost out that they can. If a better deal could have been negotiated it would have been.
I would love to see a group of large merchants get together and pick one credit card company (let's say MasterCard) and simply refuse to accept it unless security is improved.
If they did that then Mastercard would have them in a courtroom faster than you can say "anti trust regulation". The term for that is collusion and it's clearly illegal.
So which of these is Godzilla, and which is Gamera?
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Strange, id been charged like .50 on a 3.00 purchase before, i wasnt happy about it but i understand the retailers need for it.
On another note, retailers up the price at there own peril. Free market is just that, and things are generally prices at the line it could be. If a widget that cost .10 to make can be sold at 5.00 it will be, if it can be pushed up to 6.00 it will be...if its pushed up to 6.00 and nobody buys it, then its going to go back down to 5.00....
A really good example of this is the gaming consoles that get sold at a loss, this is because they cant sell it for anymore. Companies claiming taxes and credit card fees raise prices are really just lying, they raised prices because they can get away with it because the market can still move it.
if they offer the ability to pay using Visa/Mastercard its a violation of the merchant agreement between the store and the processor to offer a discount when paying cash...there might be a law somewhere...but technically its between Visa/MC and the store, and its a little shady...like those computer stores that installed windows xp using a remote activation corporate key and never gave the key or copy of the disc to the customer...nobody wins.
Let's hope Visa then sues Walmart for not paying a living wage or health benefits, forcing Visa, and everyone else, to subsidize the hundreds of thousands of Walmart employees with government services via higher taxes.
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what you want is a social safety net so that you can do stuff like that without the constant fear of bankruptcy. Canada has one, and it's why you see a lot of good sci-fi writers coming out of there.
.01%. The billionaires and what not. I say have gov't make a nice big safety net so you don't have to. But then, if we did that you could seriously compete with the likes of Walmart, and they can't have you doing that now can they?
You don't want to be responsible for your employees well being? Fine. Then let the government do it, or just admit you're happy with 100 million people (about a third of the populace) living in abject poverty.
I suppose I really shouldn't single you out. The problem is we've all been put at each other's throats by the real 1%. Heck, the
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If they win, why would they lower prices?
Because that is their business model. If the win they lower prices which diverts more business from Target and KMart and the rest. A lot of shoppers buy primarily on price and go where they are likely to get the best deal. For all the bitching people engage in over Walmart, when push comes to shove they tend to vote for low prices and overlook everything else.
No, that is their advertising slogan. Their business model is to maximize profits by using their massive purchasing power to get discounted prices from vendors and to undersell their competition. So, unless their competition lowers prices, Walmart won't.
And many of those discounted prices are discounted by WalMart saying "Hi. Drop .50 cents a unit or we stop carrying you."
It's not the years, honey, it's the mileage. - Colonel Henry Walton Jones, Jr., Ph.D.