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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.
set softtabstop=4 shiftwidth=4 expandtab nocp worlddomination
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?
"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.
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I was thinking the same thing, install an experimental "bitcoin checkout line". It would probably be too confusing for 99%+ of their customers though.
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)
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.
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.
Did you ever consider that they don't give flat fees to companies where monthly charges can't be paid with a $20 bill and some change?
There are two types of people in the world: Those who crave closure
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.
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
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This is useless, biased information unless it is reported per capita. These companies are HUGE. I could run a small business where I have 10 employees and they're all on food stamps, but if MongoMart has 10,000 employees and 11 are on food stamps, Bloomberg reports "MongoMart employees are the largest group of ... food stamp recipients on Slashdot."
Gamingmuseum.com: Give your 3D accelerator a rest.
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.
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."
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.
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.
Each transaction includes a 2.5 - 5% transaction cost that the retailer pays.
Two things..
1) That's a huge percentage for a transaction cost that takes a couple of milliseconds on computer time, mostly by companies that don't receive the transaction fee. A saving account might give you 2% for holding the money for a whole year.
2) It's a percentage, not a fee. The transaction doesn't cost more when the price of the goods is greater.
I should use this sig to advertise my book ISBN-13 : 978-1501515132.