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Everything eCommerce

Friday, July 15, 2005

Retailers sue Visa, claiming price fixing - Reuters

This news story was just released from Reuters: Essentially a group of supermarket and drugstore chains are suing Visa for price fixing. Many eCommerce customers that I have worked with have had similar experiences of being unable to locate more competitive rates since the rates were the same everywhere they checked. Hopefully the situation will improve not just for huge companies like these but smaller online merchants doing ecommerce in the thousands instead of in the millions. Here's the full scoop:

NEW YORK (Reuters) - A group of supermarket and drugstore chains has sued Visa International and its Visa USA unit, accusing the credit card association of fixing transaction fees and restricting competition in an effort to keep companies from negotiating lower rates.
In the lawsuit, filed late Thursday in U.S. District Court for the Southern District of New York, the retailers contended Visa's restrictions allowed it to extract fees that were "artificially inflated."

Visa abuses its market position to boost its revenue, the retailers said, adding that Visa improperly bundles its credit card products and network services. The stakes are significant because consumers are increasing their reliance on cards, even on small purchases.
Visa said the lawsuit was similar to class-action suit recently filed by a group of smaller retailers, alleging that Visa, rival MasterCard and some banks conspired to keep rates high.
"It appears this is another in a series of attempts by some merchants to receive all the value of electronic payments, while shifting their normal costs of doing business onto consumers," spokesman Paul Cohen said in a statement Friday.

Plaintiffs in the new suit against Visa include grocers Albertsons Inc. (NYSE:ABS - news), Kroger Co. (NYSE:KR - news), Safeway Inc. (NYSE:SWY - news) and Ahold USA Inc., a unit of Netherlands-based Ahold NV (AHLN.AS), as well as drugstores Walgreen Co. (NYSE:WAG - news), Jean Coutu Group Inc.'s (Toronto:PJCSVA.TO - news) Eckerd Corp. and Maxi Drug Inc.
The retailers are seeking an injunction and triple damages from Jan. 1, 2004 to the present. The 31-page lawsuit does not name Visa's main rival, MasterCard International, or Visa's card-issuing banks.

The lawsuit accuses Visa of unlawfully setting interchange fees charged to merchants each time a customer uses a Visa credit card for purchases, and imposing rules that prevent them from negotiating lower fees.

Retail merchants pay interchange fees to issuing banks to receive payments for transactions involving the banks' cards.

Kroger said it expects to pay about $350 million in interchange fees in 2005, up more than 215 percent from five years ago. During that time, Visa has raised the rates it charges Kroger 11 times, the retailer added.

The lawsuit said that freed of Visa's restrictions, retailers could negotiate with individual banks and decide whether to accept certain cards, or tack on a surcharge for accepting some cards.
Visa said its rates are set by "a highly competitive marketplace" adding that surcharges on credit card payments are not legal in some states.

Interchange rates have been a point of contention between retailers and the credit card companies for years. In 2003, Visa agreed to pay about $2 billion and MasterCard about $1 billion to settle a suit by retailers that claimed they were forced to accept higher-cost, signature-verified debit cards.

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