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.'"
Re:Customers may benefit... maybe (Score:5, Informative)
Wal-Mart competes primarily on the illusion of price through loss leaders on a minority of items.
There is a huge amount of publicly available research that proves that what you claim is not true. On a randomly chosen basket of goods, Walmart most of the time is the lowest price option. Not always but often enough that statistically speaking they have an advantage. They built their entire business model on low prices and the systems required to support them. Their lead is not huge but it definitely is there. The primary reason companies like Kmart have had so much trouble is that they are competing on price with Walmart when Walmart's prices are lower and pretty much everyone knows it.
The company's actual strengths are logistics and marketing.
Logistics yes, marketing no. Logistics is only an advantage in retail if you can lower costs and thus prices as a result. And marketing? Nobody is dazzled by Walmart's marketing. People go there because they sell stuff for cheap prices. It's certainly not for the shopping experience. Walmart demonstrably competes on price and always has. They also have the advantage of having a lot of their stores in small towns where there really isn't room for a competitor to come in and displace them. Their scale allows them to negotiate prices in a pretty brutal fashion with suppliers. I have close friends whose job it is to sell to Walmart and it isn't a fun experience. They take some pretty significant measures to keep costs low because their ability to keep their advantage is entirely rooted in price.
Re:Customers may benefit... maybe (Score:4, Informative)
Re:Walmart employees, rejoice! (Score:5, Informative)
yeah, meanwhile all the heroic family owned businesses in NYC are fighting a new proposed law to give employees at any business with more than 5 employees 5 paid sick days per year separate from vacation days
and i hear they all offer at least some health, pension benefits and the ability to be promoted into management of the family business
Walmart is no longer a family owned business. It is one of the worlds largest publicly traded companies. It's been a long time since Sam Walton and his values ran Walmart. As for benefits, they have been charged, repeatedly, about how they intentionally hold rank and file employees below the hours needed to qualify for benefits. So, if they have those great benefits that you list, it's not for the majority of the employees of the largest employer in the US.
Re:Walmart employees, rejoice! (Score:4, Informative)
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.
Yeah they kind of are the big bad company they are made out to be. Sure they aren't cartoon-character-evil but the choices they have made in how to run their business have some pretty serious negative consequences for which Walmart seems largely unconcerned. I'm not sure I need to repeat the list here but it's not a warm and fuzzy organization.
Re:Customers may benefit... maybe (Score:5, Informative)
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.
They are notorious for advertising they will meet any advertised price for the same product. The problem is that many of their products, while similar, are only a model that Walmart sells, at least in electronics.
Re:Customers may benefit... maybe (Score:3, Informative)
The company's actual strengths are logistics and marketing.
Logistics yes, marketing no. Logistics is only an advantage in retail if you can lower costs and thus prices as a result. And marketing? Nobody is dazzled by Walmart's marketing. People go there because they sell stuff for cheap prices.
And how do they know that Walmart is the place to go for low prices? How have they solidified themselves in the public mind as the low-cost leader? Marketing!
Re:Bitcoin (Score:5, Informative)
Undoing moderation to post this (sorry) but I have first hand knowledge of this having worked in merchant payment processing and setting up these accounts and terminals for customers. The standard VISA contract prohibits you from charging more for card purchases, however you are totally allowed to offer discounts for cash. You can not market the card as costing more (say, posting a sign saying 3% upcharge for VISA customers) but you are completely welcome to post a sign saying 3% discount for paying in cash, using a loyalty card, showing up dressed as a chicken, or whatever. Promotions and discounts are fine and are considered marketing events - "upcharging" VISA customers is not allowed and considered a penalty to customers. As long as you market correctly you're in the clear. VISA's business manual even has examples of this in their do's and do not's section.
Re:Walmart employees, rejoice! (Score:5, Informative)
Tying benefits to employment is stupid (especially with how often people are changing jobs these days). If everybody bought health insurance on their own (or had it provided by the government), then walmart wouldn't see a cost savings by hiring 2 people to work 20-30 hours instead of one to work 40-60, in fact they would probably see a savings since training costs would be reduced, turnover might be reduced (people will stop ditching the PT job as soon as they find something FT), and you might end up with a more effective employee.
IIRC, this essentially came as an unintended consequence of some government wage controls during/following the war. Companies couldn't raise wages to attract talent, so they started offering non-wage benefits. Now it is standard for it to come from your employer, while people buying their own insurance get screwed by high prices. Hard to break free of that system though...everybody expects the benefit, and it costs the company less to provide the benefit than they would have to pay you extra to afford your own insurance. So skilled/in demand workers keep getting their benefits, while the easily replaceable laborers get 30 hour work weeks.
Re:Customers may benefit... maybe (Score:4, Informative)
In North America, the cashier almost always stands.
Re:That's Odd (Score:2, Informative)
The do have offer their credit card: http://www.walmart.com/cp/Walmart-Credit-Card/632402 - note Discover card logo.
"Class-action suit over credit card fees charged to merchants gets green light in B.C." (B.C./ Canada) in the news today.
http://www.vancouversun.com/business/Class+action+suit+over+credit+card+fees+charged+merchants+gets+green+light/9672908/story.html
Re:Walmart employees, rejoice! (Score:4, Informative)
"Hard to break free of that system though...everybody expects the benefit, and it costs the company less to provide the benefit than they would have to pay you extra to afford your own insurance."
True. Right now, you do not pay income tax on the value of the employer-provided insurance that is provided by the employer (i.e. that which is not charged to you as premiums or deductibles - employers used to pick up most the tab, and still do pick up some of it). It was usually not even possible for you to get a good answer from HR on the value of that. In the past several years, something akin to the value of that untaxed benefit has started appearing on your W-2 (as information only - not included in your taxable income).
McCain floated a plan in the 2008 U.S. Presidential race to slowly phase out that untaxed-benefit, which would ultimately divorce health-insurance from being mostly employer-provided: it would start including the value of the employer-provided health insurance as taxable income to you, and then provide a tax credit that would cover the majority of this new taxable-income (based on some value of an average health-insurance plan). Over time, that credit would be reduced, under the theory that in a perfect free-market for labor, wages paid would adjust upwards to compensate as previously-health-care-providing employers competed on a tax-neutral playing field against employers that paid 100% in cash (whose employees would purchase their own insurance with after-tax money, just like any other consumer purchase).
This would help to disclose both how much health-insurance costs (theoretically bending the health-case cost curve down), as well as ramping down any tax benefit associated with employer-provided health insurance. Eventually, when there would be no advantage to employer-provided health insurance, people would buy policies on the open market without any connection to their employer, and you would be able to carry that policy with you when you changed employers - no COBRA, because it's not needed.
Of course, that plan did not address all of the other problems with the health insurance market, and of course not all of the problems with delivery of health care in the U.S.. But I liked the plan, because it provided a glide path that seemed to make sense, in reaching a goal of separating the purchase of health-insurance policies from the employer you happen to be working for at the time, when that connection no longer makes any sense.