Retailers Sue Visa Over Fees

A group of supermarket and drugstore chains has sued Visa International and its Visa USA Inc. 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 in New York, the retailers contend that Visa’s restrictions allow it to extract fees that are “artificially inflated.”

Visa abuses its market position to boost its revenue, the retailers said, adding that Visa improperly bundled its credit card products and network services. The stakes are significant because shoppers are increasing their reliance on credit cards, even on small purchases.

Visa said the lawsuit was similar to a class-action suit recently filed by a group of smaller retailers that alleged Visa’s 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,” Visa spokesman Paul Cohen said.

Plaintiffs in the new suit against Visa include grocers Albertsons Inc., Kroger Co., Safeway Inc. and Ahold USA Inc., a unit of Netherlands-based Ahold NV, as well as drugstores Walgreen Co., Jean Coutu Group Inc.’s 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 retailers from negotiating lower fees.

Retailers pay interchange fees to issuing banks to receive payments for transactions involving the banks’ cards.

Kroger said it expected to pay about $350 million in interchange fees in 2005, up more than 215% from five years ago.

The lawsuit said that freed of Visa’s restrictions, retailers could negotiate with banks and decide whether to accept certain cards, or tack on a surcharge for accepting some cards.

Visa said its rates were set by “a highly competitive marketplace,” and added that surcharges on credit card payments weren’t legal in some states.