Wal-Mart Sues Visa For $5 Billion For Rigging Card Swipe Fees 455
Hugh Pickens DOT Com writes: "Reuters reports that Wal-Mart has sued Visa for $5 billion, accusing the credit and debit card network of excessively high card swipe fees. Wal-mart is seeking damages from price fixing and other antitrust violations that it claims took place between January 1, 2004 and November 27, 2012. In its lawsuit, Wal-Mart contends that Visa, in concert with banks, sought to prevent retailers from protecting themselves against those swipe fees, eventually hurting sales. 'The anticompetitive conduct of Visa and the banks forced Wal-Mart to raise retail prices paid by its customers and/or reduce retail services provided to its customers as a means of offsetting some of the artificially inflated interchange fees,' says Wal-Mart in court documents. 'As a result, Wal-Mart's retail sales were below what they would have been otherwise.' Interchange fees, the industry term for card-swipe fees, have been a major point of contention between retailers and banks. The fees are set by Visa and other card networks and collected by card-issuing banks like J.P. Morgan Chase & Co. Retailers have argued that the fees had been set too high due to a lack of competition with the two payment industry giants.
Wal-Mart also took a shot against Visa over payment card security. Data breaches last year at Target Corp., Neiman Marcus and others have drawn attention to the country's slow adoption of card technology that uses computer chips and PIN numbers and is seen as less susceptible to fraud than the current system of magnetic stripes. 'Wal-Mart was further harmed by anti-innovation conduct on the part of Visa and the banks,' says the lawsuit, 'such as perpetuating the use of fraud-prone magnetic stripe system in the U.S. and the continued use of signature authentication despite knowledge that PIN authentication is more secure, a fact Visa has acknowledged repeatedly.'"
Wal-Mart also took a shot against Visa over payment card security. Data breaches last year at Target Corp., Neiman Marcus and others have drawn attention to the country's slow adoption of card technology that uses computer chips and PIN numbers and is seen as less susceptible to fraud than the current system of magnetic stripes. 'Wal-Mart was further harmed by anti-innovation conduct on the part of Visa and the banks,' says the lawsuit, 'such as perpetuating the use of fraud-prone magnetic stripe system in the U.S. and the continued use of signature authentication despite knowledge that PIN authentication is more secure, a fact Visa has acknowledged repeatedly.'"
It's about time (Score:5, Insightful)
This is, and has long been, a huge ripoff. I'm rather sure that Walmart doesn't pay the full 3% that Visa/MasterCard like to charge for transactions, but when you look at the overhead of transactions in the cryptocurrency markets, you can see how ridiculously overpriced the credit card transactions are. The costs here are near 0, and so should the charges be, but the system is carefully crafted to avoid competition, and that's illegal.
Customers may benefit... maybe (Score:5, Insightful)
Because if Walmart wins, they will surely use the money to raise your meager wages instead of buying the CEO a new yacht.
Raise wages? Probably not. Lower prices? Very possibly. Walmart competes primarily on price so anything they can do to lower costs tends to get at least partially passed on to customers in order to keep their competitive advantage. A lot of companies would pocket the savings but in this particular instance it might actually end up benefiting customers.
Plus Walmart beating up Visa on price is almost certainly going to benefit consumers in the long run and Walmart is big enough to actually succeed. The cost of credit card swipe fees gets rolled into the prices we pay for products so if they get lowered at least some of that money will flow through to us as end customers. Not all of course but definitely some.
Re:Walmart employees, rejoice! (Score:2, Insightful)
I am sure they practice giving themselves minimum wage. link [wikipedia.org]
Re:Customers may benefit... maybe (Score:5, Insightful)
Raise wages? Probably not. Lower prices? Very possibly. Walmart competes primarily on price so anything they can do to lower costs tends to get at least partially passed on to customers in order to keep their competitive advantage. A lot of companies would pocket the savings but in this particular instance it might actually end up benefiting customers.
I get your point, but I can't wonder how anyone could possibly swallow their "You made our customers poorer, now compensate it by paying damages to us!" with straight face. Not being a US resident, I'll be the first to admit that my awareness of legal happenings in the US is strictly limited, but I was always under the impression that Americans mostly opt for a what is usually called a class action lawsuit whenever something like this becomes public knowledge. The fact that the damages should go to what amounts to a third party is incomprehensible to me.
Re:Walmart employees, rejoice! (Score:5, Insightful)
I know everyone likes to hammer on Walmart, but the fact of the matter is I know plenty of people that work at walmart. They have low wage jobs that are typically taken by teenagers and college students but then they have long term employment as well. My aunt started there with no prior experience 30 years ago and made enough to buy a 2 story house and put all of her kids through college as a single mom. Her oldest daughter got a full scholarship from walmart and is now a school teacher. Walmart paid for all of her tuition, her housing and just about all of her expenses. My bests friends wife worked at walmart for 10 years and learned accounting. She now works for the veterans bureau and swears she'd never have gotten the experience required to work there without walmart.
I'm not saying that walmart doesn't have it's problems. But any company that size would. They are not the big bad evil company everyone makes them out to be.
Re:Customers may benefit... maybe (Score:5, Insightful)
I'd add that they also maintain this illusion by sometimes (often?) selling similar-but-inferior products. For instance, a vacuum that is identical to a top-rated cordless vacuum, but with a smaller motor and battery. If you run through there with a bar code scanner on your phone you can see just how many of the products are actually different than the ones available through Amazon and friends.
Re:Wal-Mart vs. Visa (Score:2, Insightful)
Yes. By increased government regulation.
Oh, and we lose too.
Re:Customers may benefit... maybe (Score:5, Insightful)
...lower costs tends to get at least partially passed on to customers...
Including my taxes to cover their worker's government assistance.
...might actually end up benefiting customers.
You shouldn't have to do either. Walmart could pay a just wage. Of course that would lower dividends paid to shareholders. So, think of paying higher taxes because many Walmart workers needing assistance as another government transfer payment - from you to Walmart's shareholders.
I'd rather pay more up front and have my taxes be put to better use elsewhere. Pay them a living wage already, FFS.
Credit Card Features and Rewards (Score:5, Insightful)
Expect your travel insurance, extended warranty protection, points, cash back, and other credit card features to dry up rapidly if interchange fees are reduced. These perks that have been built up over the years are not free, they are paid for by interchange fees.
Re: Customers may benefit... maybe (Score:2, Insightful)
I really wish people would stop with the assumption that every possible job out there must support a family of four as the sole income source.
This. How many of the lower-paid Walmart workers are the primary breadwinners for their family? And what skills to they bring to the table that they should be paid more?
The reason they are not paid very much is because it is a very low-skill job that pretty much anybody can do. This means that they are easily replacable so they have no negotiating power when considering salary. If these people want to earn more money they should develop skills that would be worth more to an employer than their current skillset which seems to consist of "able to breathe oxygen".
Re:Customers may benefit... maybe (Score:5, Insightful)
Re: Customers may benefit... maybe (Score:2, Insightful)
While there is a need for people to be able to support their families, not every job out there should be required to be a job that someone can support their family on. I can't imagine how hard it must be for kids in highschool or college to get a part time job now that the minimum wage is so high. Some people just want a little money, and want to keep busy. they don't need to buy food, pay for housing, or do any of the other things you need to support a family. If you want to raise a family, your aspirations should be much higher than working at Walmart. If you're working at Walmart, and trying to live off that income, try taking a tip from students, and get some roommates. Putting 4-5 people in a rental townhouse can really bring down the cost of living if you all chip in your fair share.
Re:Customers may benefit... maybe (Score:2, Insightful)
If you do not like it when an employer cuts your hours to keep you under a government mandated (Now you must be paid extra in stuff that you may or may not want) threshold. Maybe you should look at the stupid mandate as the problem.
Re:Walmart employees, rejoice! (Score:5, Insightful)
Walmart? The retail chain that pays its employees such a low wage that they can't even afford to shop at Walmart, and deliberately cuts back on their employees' hours to avoid having to pay benefits? *this* is the company you hold up as the model of how to run a business?
http://jobs.aol.com/articles/2... [aol.com]
If Walmart is a paragon, what the hell does that make Costco?
Re:Walmart employees, rejoice! (Score:5, Insightful)
Small businesses are very very different from large businesses. Most of them are barely scraping by and can not afford to pay somebody to "not work". Every business model is different and in terms of revenue generating vs business support employees the cost varies greatly when people are out.
I want you to imagine your paycheck, right now, whatever it is. Now imagine paying somebody else's paycheck out of that. Now imagine being told that you have to do that even when they call in sick at the last minute. You've just been inside what it's like to run a small business. My wife and I lived on minimum wage for 3 years to make sure we could make payroll every month while starting the business. She now employees 20 people, with vacation time, sick days and benefits and makes about 30% more than she would have if she just went to work for somebody else...without all of the constant risk of bankruptcy. It will now take about 10 years of this income level to make up what we lost (in salary alone) just starting the business in the first place and that's not including the cash investment, which was significant.
But please, tell me again why every business should have to compensate everybody exactly the same. Running a small business is incredibly difficult. Starting one is even harder. 9 out of 10 small businesses fail from LACK of capital. Don't make this more difficult.
If the benefits offered by your employer aren't good enough for you, go somewhere that has the benefits you deserve.
Re:Walmart employees, rejoice! (Score:3, Insightful)
Re:Customers may benefit... maybe (Score:5, Insightful)
IF the government would raise the minimum wage to a 'living' level then we'd see a slow move away from food stamps.
Unlikely. Raising the minimum wage would result in more automation, more outsourcing, and higher unemployment. Most people on food stamps have at least one household adult that is unemployed or underemployed. Young black men have an unemployment rate of 40%. The problem is not "low wages" but "lack of entry level jobs". It is unrealistic to expect an unskilled and poorly educated young man with no work history to compete for a $15/hour job. He isn't going to get it. Instead, he needs an $8/hour job to gain some experience, and learn some basic job skills, like showing up on time and dressing appropriately. Then he can move up. But that won't happen in you remove the bottom rung from the ladder.
Re:Customers may benefit... maybe (Score:4, Insightful)
...lower costs tends to get at least partially passed on to customers...
Including my taxes to cover their worker's government assistance.
...might actually end up benefiting customers.
I'd rather pay more up front and have my taxes be put to better use elsewhere. Pay them a living wage already, FFS.
Your taxes will go towards providing assistance to the less fortunate if they were unemployed too. In fact even more tax-funded assistance would be needed. You could just as easily be thanking Walmart for subsidizing our taxes by providing wages to low skilled citizens. (note that I think both of these arguments are silly)
Re:Customers may benefit... maybe (Score:4, Insightful)
For one, I don't think that Walmart's margins are so thin that they can't afford...
This is a case where it doesn't matter what you think. Walmart is a master of optimizing prices. Maximizing revenue is a duty to their shareholders. When they see waste, in this case on the transaction fees, they work their hardest to reduce it. That is what's happening here.
Walmart serves a different market from Costco so your bit about amex is not applicable. There was a time 10 or 15 years ago when Walmart tried to start a bank to get in on the interchange rates and government regulators killed the idea.
Please... (Score:5, Insightful)
Maybe Walmart is just being stupid. Did they ever consider that?
Walmart is many things but stupid is not among them.
My swipe fees are zero.
No they are not. They might be rolled in with some other charge but you aren't getting it for free. If you pay a flat fee per month then you do a good approximation of zero transaction volume.
Maybe they should have gotten a plan that doesn't suck.
Walmart has more negotiating power than pretty much any retail firm on earth and they squeeze every dime of cost out that they can. If a better deal could have been negotiated it would have been.
Re:Walmart employees, rejoice! (Score:5, Insightful)
Bitch about Walmart employees all you want...
Fine. I will, because I don't give a shit about superficial things like the CEO's office or the car he drives. Walmart is a parasite on virtually every community in which they operate. Not only are their wages too low for their employees to actually live on, they actively promote the subscription to government services (welfare) by those employees. Privatize the profits and socialize the expenses, and then get some gullible apologist to talk about how "humbler" Walmart's leadership is.