Wal-Mart sues Visa for $5 bn over card swipe fees

Wal-Mart Stores Inc has sued Visa Inc, operator of the world's largest electronic payments network, for $5 billion, for charging excessively high card swipe fees to its customers when they paid with a credit or debit card.

The lawsuit filed this week in the US District Court for the Western District of Arkansas, comes after the Arkansas-based retail giant opted out of a $5.7-billion settlement with Visa and Mastercard in December 2013.

Wal-Mart, the world's largest retailer alleges that Visa and all major banks conspired to fix the fees that retailers paid to accept their credit and debit cards, amounting to an average of about 2 per cent of the purchase price.

Wal-Mart pays Visa "interchange" fees for each customer swiping a credit or debit card for their purchases, and the fees, which are set by card processing networks, are split with the banks that issue the cards.

But interestingly, credit card issuers also charge credit card users a fee on credit purchases at the end of the billing cycle, and do not reveal how much they charge retailers and the credit card customers.

Wal-Mart alleges that Visa's swipe fees generated more than $350 billion for card issuers between 1 January 2004 and 27 November 2012, mainly at the cost of retailers and their customers.

Credit card companies have long argued that customers tend to spend more while using the credit or the debit card compared to cash or cheques.

Retailers wanted to pass on the fees to the customers, but both Visa and MasterCard have always rejected this plan, although retailers were giving discount to cash-paying customers.

According to the largest US retail industry advocacy group National Retail Federation, swipe fees costs stores around $30 billion per year.

A federal judge in New York approved a $5.7 billion class action settlement in December between 7 million US retailers and Visa and MasterCard, despite several thousands of them saying that the settlement amount was inadequate and have since then filed appeals.

Wal-Mart, along with Amazon.com Inc, and Target Corp were among the larger retailers that opted out from the settlement so that they could file individual suits against the card issuers.