CINCINNATI -- Grocery and convenience-store operator Kroger has become the latest retailer to file a lawsuit against Visa over its chip-and-signature rule regarding debit transactions, according to court documents.
The suit, filed in U.S. District Court for the Southern District of Ohio, is similar to one Bentonville, Ark.-based Wal-Mart filed against Foster City, Calif.-based Visa this past May, attacking the Visa mandate that merchants allow customers paying with Europay MasterCard Visa (EMV) or “chip” cards to authorize the transaction with a signature. Atlanta-based Home Depot just this month filed a similar lawsuit.
Cincinnati-based Kroger requires customers using debit cards equipped with the EMV computer chip to authorize the transaction with a personal identification number, or PIN.
Kroger claims the PIN-debit transactions are more secure than customer signatures, which are easily copied. PIN transactions also are cheaper for merchants due to the ability to work with competing networks to transmit the transactions.
In the lawsuit, Kroger said Visa demanded that Kroger reconfigure its terminals to remove the required PIN verification and to use a Visa “application identifier,” also known as an “AID,” that would force a given Visa debit transaction to be routed to Visa for processing, regardless of whether the cardholder used PIN or signature to verify the card. Visa threatened that if Kroger did not make these systemwide changes, and do so quickly, then Visa would fine Kroger for not complying with Visa’s rules.
Kroger said Visa levied fines of $7 million against it after it didn’t change its practices and told the merchant it would raise the fees it charges to process debit transactions. In the lawsuit, Kroger said it had paid $3.1 million of the $7 million so far. Kroger also said Visa threatened to cut off Kroger’s ability to accept all Visa debit cards.
Kroger said it would have to reprogram “tens of thousands” of terminals to give cardholders the choice between a signature and a PIN. Last year, Kroger says it rang up $29 billion in Visa debit-card transactions and that cutting off its ability to accept Visa debit cards “threatened catastrophic consequences" for Kroger’s business.
“There is no rational basis for Visa to cut off Kroger’s ability to accept any or all Visa debit cards unless Visa intended to punish Kroger,” the grocery chain said.
In a statement to CSP Daily News, a Visa spokesperson said, “Visa does not require Kroger to route its transactions only through the Visa network. Visa is focused on protecting a cardholder’s right to choose whether to sign or enter a PIN when completing their payment with a Visa debit card at checkout.”
In addition to grocery stores, Kroger operates about 800 convenience stores with brand names such as Turkey Hill, Kwik Shop and Quik Stop.
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