Wal-Mart Sues Visa For $5 Billion Over Excessive Card Transaction Fees

Wal-Mart filed a lawsuit against Visa this week, alleging the credit card company is engaging in a conspiracy with US banks to manipulate the fees charged to retailers for in-store card transactions.

Because the lawsuit is claiming Visa has violated federal anti-trust laws by engaging in price fixing, the damages could potentially amount to as much as $15 billion in total. As an element of the anti-trust allegations, Wal-Mart is stating, “Visa’s monopoly power has enabled it to dictate price and inhibit competition.”

This latest legal maneuver on the part of Wal-Mart was possible due to their decision to withdraw from a class action lawsuit filed on behalf of 7 million individual retailers against both Visa and MasterCard. A settlement in this matter was reached in 2012 with an estimated value of $7.25 billion, but Wal-Mart, Amazon.com and Target were among the larger retailers that decided to be removed from financial considerations pertaining to this particular matter. This move allowed these companies to pursue individual lawsuits independent of the larger class action. Because of this exodus, the original valuation of the settlement was reduced to $5.7 billion.

Wal-Mart withdrew from the previous class action for a number of reasons, including unhappiness with the lack of safeguards and provisions in place that would prevent Visa from possibly increasing credit card transaction fees in the future. Another concern on the part of Wal-Mart was the possibility of being restricted from pursuing further legal action down the road.

The Arkansas based Wal-Mart is accusing Visa and unnamed US banks of conspiring “to illegally fix the interchange fees and inflate the network fees that Wal-Mart and other merchants pay on Visa charge card transactions.”

The time frame of this alleged activity on the part of Visa is from 2004-2012. Wal-Mart is basing the $5 billion figure on “enormous damages” sustained during this period, and actually claims the financial hit is in excess of this total.

According to the lawsuit, Wal-Mart and other retailers are essentially being held hostage by the fixed rates orchestrated by Visa and major US banks:

“There is no competition because merchants are prevented from realizing the price-reducing benefits that would result if issuers competed.”

In addition, Wal-Mart has indicated it has had no alternative but to comply, as declining to accept Visa cards “would result in an unacceptable decrease in sales.”

The lawsuit comes after Visa attempted to thwart Wal-Mart by filing their own lawsuit last year in an effort to stop “the continuation of endless, wasteful litigation between the parties.”