advertisement
advertisement

Walmart: Don’t Stop Me Before I Sue (Visa) Again

Written by Frank Hayes
July 25th, 2012

Walmart really wants out of the $6 billion interchange settlement, and for a very specific reason: The world’s biggest retailer doesn’t want to be barred from suing Visa and MasterCard again. And the only way to preserve that right is to get enough big chains to bail out of the settlement.

But the real problem—Visa’s death-grip on payments—isn’t one any lawsuit will solve. Big retailers abandoned their store cards because taking Visa was cheaper than maintaining their own credit infrastructure. Now Visa is holding all the cards, and chains are unenthusiastic about any of the alternatives.

The settlement, which would also enable retailers to add a surcharge for payment-card transactions or to discount debit-card sales compared with credit-card sales, was designed to avoid an antitrust trial against Visa, MasterCard and card-issuing banks that was slated to start in September. Kroger, Walgreens, Publix and 15 other named plaintiffs initially agreed to the deal.

Walmart isn’t a named plaintiff in the proposed class-action settlement, just a retailer that falls into the settlement class. Ordinarily, that would mean the chain could simply opt out of the settlement, collect no money and preserve all its rights.

But according to Thompson Reuters legal reporter Alison Frankel, this settlement is as convoluted as you would expect from the people who gave us PCI. Under the rules for this particular class action, retailers can only opt out of their share of the $6 billion plus the eight-month reduced-interchange period—but not the limit on future lawsuits. “It’s the opposite of take the money and run: Give up the money and stay tied to the other terms of the settlement,” Frankel wrote.

That explains Walmart’s sudden full-court press to scuttle the whole deal. If it can get retailers who represent 25 percent of Visa and MasterCard’s dollar volume to reject the deal, the card brands can unilaterally declare the deal dead. Alternatively, if enough chains bail on the deal, the judge can reject the settlement and the massive case can continue to lurch toward a trial. But just the settlement approval or rejection will tie things up until at least early summer of 2013.

(For anyone who really wants to keep score, before any of that happens the court has to sort out the situation with the National Association of Convenience Stores. The Association is the only named plaintiff that objects to the settlement terms and has now changed lawyers to Constantine Cannon, the law firm that represented Walmart when it led the last big retailer interchange revolt, which resulted in a $3 billion settlement in 2004. Small world, huh?)

All these complications—and especially Walmart’s vehement opposition—make it increasingly unlikely that the settlement will survive as it currently stands. That means eventually the lawsuit will go to trial.

Trouble is, that’s almost certainly pointless for chains looking for interchange relief. They don’t need a verdict. They need competition in payments.

And that’s where the real conflict lies on the retailers’ side: U.S. retailers don’t much like any of the alternatives to Visa and the banks—or even alternatives to magstripe cards.


advertisement

2 Comments | Read Walmart: Don’t Stop Me Before I Sue (Visa) Again

  1. Biff Matthews Says:

    These law suits are becoming like this years election rhetoric and ads, very, very tiresome. The retailers are like whining children who don’t like something yet don’t know what they want so they make life hell for everyone. It’s time to put fourth a viable alternative or shut up.

  2. Robert Day Says:

    The real solution would be for the government to put a stop to the price fixing. Then the retailers would not have to fight the banks (processing networks). Also, we all know, all cost of products and services get added back into the cost of business. Therefore, the less the business pays the banks, the less the cost of their product or services for all of consumers.

    I would like to see a business grow and hire more people, than to see a bank CEO get an extra 5 million dollar bonus.

Leave a Reply

Readers, specifically those who want to comment on a story:
Our Comment SPAM system is getting very aggressive these days and has been blocking legitimate comments. If you post a comment and don't see it appear within 2 hours or so, can you please send a heads-up to customer-service@storefrontbacktalk.com? Ideally, please include the time you posted the comment. That will allow us to try and hunt for it. Thanks! P.S. We're working on fixing the system, but we don't want to lose any valuable comments in the meantime.

Newsletters

StorefrontBacktalk delivers the latest retail technology news & analysis. Join more than 17,000 retail IT leaders who subscribe to our free weekly email. Sign up today!
advertisement

Most Recent Comments

Why Did Gonzales Hackers Like European Cards So Much Better?

I am still unclear about the core point here-- why higher value of European cards. Supply and demand, yes, makes sense. But the fact that the cards were chip and pin (EMV) should make them less valuable because that demonstrably reduces the ability to use them fraudulently. Did the author mean that the chip and pin cards could be used in a country where EMV is not implemented--the US--and this mis-match make it easier to us them since the issuing banks may not have as robust anti-fraud controls as non-EMV banks because they assumed EMV would do the fraud prevention for them Read more...
Two possible reasons that I can think of and have seen in the past - 1) Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code. 2) Also, in offline chip countries the card determines whether or not a transaction is approved, not the issuer. In my experience, European issuers haven't developed the same checks on authorization requests as US issuers. So, these cards might be more valuable because they are more likely to get approved. Read more...
A smart card slot in terminals doesn't mean there is a reader or that the reader is activated. Then, activated reader or not, the U.S. processors don't have apps certified or ready to load into those terminals to accept and process smart card transactions just yet. Don't get your card(t) before the terminal (horse). Read more...
The marketplace does speak. More fraud capacity translates to higher value for the stolen data. Because nearly 100% of all US transactions are authorized online in real time, we have less fraud regardless of whether the card is Magstripe only or chip and PIn. Hence, $10 prices for US cards vs $25 for the European counterparts. Read more...
@David True. The European cards have both an EMV chip AND a mag stripe. Europeans may generally use the chip for their transactions, but the insecure stripe remains vulnerable to skimming, whether it be from a false front on an ATM or a dishonest waiter with a handheld skimmer. If their stripe is skimmed, the track data can still be cloned and used fraudulently in the United States. If European banks only detect fraud from 9-5 GMT, that might explain why American criminals prefer them over American bank issued cards, who have fraud detection in place 24x7. Read more...

StorefrontBacktalk
Our apologies. Due to legal and security copyright issues, we can't facilitate the printing of Premium Content. If you absolutely need a hard copy, please contact customer service.