Business

Wal-Mart urges retailers to reject $6B credit card fee deal

Wal-Mart Stores Inc. is lobbying fellow retailers in the U.S. to reject a $6-billion settlement that America's largest credit card companies have agreed to pay for charging them unfairly high fees.
Wal-Mart and other retailers have long alleged that the processing fees credit card companies such as Visa and MasterCard charge them were unfair and open to abuse (Geoff Howe/Canadian Press)

Wal-Mart Stores Inc. is lobbying fellow retailers in the U.S. to reject a $6-billion settlement that credit card companies have agreed to pay for charging them unfairly high fees.

Retailers have long alleged that the processing fees credit card companies such as Visa and MasterCard charge them were unfair and open to abuse. The dispute itself dates back to at least 2005, when retailers including Kroger Co., Safeway Inc. and Walgreen Co. all launched price-fixing suits against the industry.

But the issue has really gained traction over the past two years as the advent of premium credit cards has seen these fees skyrocket to, in some cases, three per cent of the purchase price of a transaction.

Earlier this month, the two major credit firms settled the major outstanding lawsuits on the issue with opponents who allege card firms collude to fix prices unfairly high. But on Tuesday, Wal-Mart urged all retailers — even "mom and pop" vendors who are typically philosophically opposed to anything the world's largest retailer says — to reject the settlement.

The company takes issue with the settlement for two broad reasons: there's nothing in it that ensures credit card companies won't simply hike rates further to offset any penalties they have to pay, and it asks retailers to waive their rights to fight the credit firms on this issue in the future.

The terms of the settlement allow for retailers to charge customers an extra fee for processing payments by credit card, and the credit card companies have agreed to reduce swipe fees for eight months. That's believed to be worth about $1.2 billion, but the settlement offers no guarantee that fees can't simply get hiked later to offset  that lost revenue.

"The proposed settlement would not structurally change the broken market or prohibit credit card networks from continually increasing hidden swipe fees, which already cost consumers tens of billions of dollars each year," Bentonville, Ark.-based Wal-Mart said in a statement. "The proposed settlement would require merchants to broadly waive their rights to take action against the credit card networks for detrimental conduct or acts."

Wal-Mart also says the settlement will stifle "emerging payments innovation" such as the types of mobile payment technological currently in place in this generation of smartphones.

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