Charging Forward

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Charging Forward

NEW YORK -- Retailers are readying for their lawsuit against Visa U.S.A. and MasterCard International, and newly unsealed documents reported by Reuters indicate that their case may be a lot stronger than previously thought.

The documents indicate that Visa was attempting to destroy competition from rival payment networks, primarily the regional bank debit networks, such as Star and NYCE, which charge far less per transaction than do Visa and MasterCard.

Retailers were aware of the huge difference in price for essentially the same product, and Wal-Mart, among others, dropped acceptance of Visa debit cards, then was forced to begin accepting them again under Visa's "accept-all" rule, which requires a retailer that accepts one Visa product to accept them all, including new products.

Retailers charge that acceptance of Visa and MasterCard products is now necessary to remain in business, and that the two bank associations are using that fact to suppress rival payment networks and to maintain artificially high pricing on some card products.

A $100 transaction using a Visa or MasterCard offline debit card costs a retailer between $1.50 and $3.00, whereas the same transaction using an online debit card, commonly called an ATM card, may cost as little as 12 cents, and no more than 35 cents. Retailers say that the losses from these fees total billions of dollars since Visa check cards first appeared in the early 1990s, and are suing to recover the estimated $15 billion plus damages, which makes the suit worth some $50 billion, with the meter still ticking.

Reuters reports that a hand-written Visa memo says, in part, "Visa would like to see online disappear. Much bigger threat than (American Express Co.) In an online environment, Visa often loses fee." Other documents indicate that Visa paid Bank of New York, a Visa member, $30 million to protect acceptance of Visa cards over regional payment networks.

Wal-Mart filed suit in 1996, charging restraint of trade and monopolistic practices, and the suit was later turned into a class action lawsuit, representing all U.S. retailers, past and present. Trial has been put off at Visa and MasterCard's request several times, but is scheduled to open in April in New York City.

Visa and MasterCard contend that acceptance of their cards makes life easier for retailers, that the cost of acceptance is actually less expensive than the cost of handling cash, and that the value of the Visa and MasterCard names attract customers to retailers who accept the cards.