NEW YORK -- Some of the country's biggest retailers sued Visa Inc. and MasterCard Inc. on Thursday, reported Dow Jones, arguing that the payment networks have imposed anticompetitive interchange or "swipe" fee transaction policies and card-acceptance rules on merchants.
The lawsuit, brought by Target Corp., Macy's Inc., Saks Inc., Kohl's Corp. and other merchants, claims that existing efforts to "curb the exercise of market power by" Visa and MasterCard have failed to provide sufficient relief to retailers who accept their credit and debit cards.
The merchants said they have opted out of a pending settlement in separate class-action litigation against Visa, MasterCard and several large banks that issue the payment networks' cards. That deal, which could deliver up to $7.25 billion to nearly eight million merchants if approved, has drawn opposition from some retailers and trade groups who argue it will not prevent transaction fees from rising.
The retailers involved in Thursday's suit, which also include Office Depot Inc., J.C. Penney Co. Inc. and Abercrombie & Fitch Co., paid more than $1 billion in swipe fees as a result of accepting Visa and MasterCard cards during their last fiscal year.
The plaintiffs are seeking compensatory and triple damages, as well as attorneys' fees.
Swipe fees are set by Visa and MasterCard but collected by card-issuing banks such as Bank of America Corp. and J.P. Morgan Chase & Co. each time a customer pays with a card.
The suit, filed in U.S. District Court in Manhattan, said Visa and MasterCard have eliminated competition that could drive down transaction fees by adopting identical rules that apply to banks and merchants.
"The exercise of this market power has led merchants to pay excessive interchange fees," the suit said, raising similar complaints made in suits filed in U.S. District Court in Brooklyn by numerous retailers and merchant trade groups in 2005.
Visa, MasterCard and several banks reached a settlement of those suits last July under which they agreed to pay $6.05 billion to merchants and temporarily reduce swipe fees by an amount equal to $1.2 billion. Visa and MasterCard also agreed to alter some of the rules they require merchants to abide by to accept their cards, including eliminating a ban that previously prevented retailers from surcharging customers who pay with a card.
Judge John Gleeson of the Brooklyn court granted preliminary approval to the settlement in November, and a hearing on final approval is scheduled for Sept. 12.
Several trade groups, including the National Retail Federation, National Grocers Association and National Association of Convenience Stores, have lobbied hard against the deal, though, arguing it strips retailers of their legal rights by eliminating their ability to bring future litigation against Visa and MasterCard. They also complain that the settlement amount is a drop in the bucket compared with what they have paid in transaction fees.
A deadline to opt out of the settlement is May 28. People familiar with the case expect retailers that do so will file new lawsuits against the payments networks to seek more money.
Thursday's lawsuit "was fully expected and just more theatrics to get more publicity in advance of the May 28 deadline," said Trish Wexler, a spokesperson for the Electronic Payments Coalition, which represents Visa, MasterCard and banks that issue credit and debit cards. "This just really shows the level of greed involved here--that $7.25 billion wasn't enough for these retailers, so they needed to sue for even more."
On Monday, a group of 19 merchants including 7-Eleven Inc., Alon Brands Inc., Wal-Mart Stores Inc., Starbucks Corp. and Gap Inc., said they were opting out of the settlement and considering taking additional legal actions against Visa and MasterCard.
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