IMRA PLANS TO JOIN LAWSUIT AGAINST MASTERCARD AND VISA
Byline: Jennifer Owens
WASHINGTON — The International Mass Retail Association said Monday it plans to join a class action lawsuit charging that Visa and MasterCard violate antitrust laws by forcing retailers to accept their debit cards in order to receive traditional credit card services.
The suit — originally filed last October by Wal-Mart Stores and The Limited against Visa only — has since been joined by numerous other sole-proprietor retailers.
Morrison G. Cain, IMRA’s vice president of legal and public affairs, said his association plans to join the suit as the deadline for additional plaintiffs nears.
In the original suit, Wal-Mart and Limited allege that by tying its cards together, Visa has been able to charge higher fees for its debit cards despite lower costs and risks compared with credit cards.
According to the suit, Visa Check cards were used in approximately 556 million retail transactions in 1995 with a total sales volume of $22 billion. For those, the suit says retailers paid at least $250 million. It added that retailers would have paid only $33 million had those transactions occurred with an on-line Automatic Teller Machine card.
Led by former New York State antitrust official Lloyd Constantine, the suit, which will be heard by a federal judge in New York, seeks injunctions and unspecified damages.
Cain said IMRA will not seek damages when it joins the suit.
“The reason we are going in is that even though Wal-Mart and Limited are IMRA members, the issue effects many more,” Cain said. “We think it’s a serious competitive issue.”
In a statement, however, Visa said allowing a merchant to pick which cards to accept “based on a particular cardholder’s financial arrangements with an issuer would seriously undermine the entire premise on which the Visa system is built.”
Added Visa, “The Visa rule provides that if a merchant accepts Visa, he or she accepts all Visa cards. This, in turn, ensures that a cardholder is secure in the knowledge that his/her card will be accepted — regardless of which institution issued the card.”
But Wal-Mart and Limited claim this “honor all cards” rule is costing them millions.
According to the suit, Visa’s lowest interchange fees for a $100 transaction currently costs a retailer $1.25 if made with a Visa credit card or $1.10 if completed with a Visa Check debit card. Accepting an on-line ATM card costs a retailer about a nickel on a $100 purchase.
“If a retailer could refuse these cards, the consumer is likely instead to pay with a check, cash (which can be obtained from an ATM frequently in or adjacent to the retail store) or with a regional on-line debit card,” the lawsuit stated.
“Thus,” the suit added, “were retailers free to reject Visa Check or even free to request a different form of payment, there is virtually no possibility that they would lose the sale. All they would lose are the exorbitant fees that are forced upon them by the Visa tying arrangement.”
The two retail chains allege this arrangement has become particularly costly now that Visa has embarked upon an aggressive national advertising campaign for its check card. According to the suit, in 1995 there were approximately 32 million Visa Check cards in circulation.
“Nearly everybody takes credit cards. You need to do that in most cases to be competitive,” Cain said. “But the debit card, if it stood on its own merits, would have much more resistance.”