Kroger and Six Other National Retailers File Federal Antitrust Lawsuit Against Visa Over Interchange Fees, Other Issues

The lawsuit cites Visa's member banks as co-conspirators in the alleged illegal behavior. MasterCard was not named in the lawsuit. A copy of the Complaint and Demand for Jury Trial (PDF) is available online.

"The collective setting of interchange fees by Visa and its member banks constitutes horizontal price-fixing that leads to higher retail prices for our customers,” said Paul Heldman, Kroger senior vice president and general counsel.

“This hidden cost must be borne by all Kroger customers, whether they pay for their groceries with cash, by check or by debit or credit card. At a time when technology has made card authorization and processing faster, cheaper, safer and more efficient than ever, we believe that our customers should be receiving the benefit of declining interchange fees. Instead, Visa is using its extraordinary market power to profit at our customers' expense.”

The lawsuit alleges that Visa has unlawfully set the interchange fees that are charged to Kroger and other merchants each time a customer makes a purchase with a Visa credit card. The suit also charges Visa with creating and imposing rules and restrictions on merchants that preclude Kroger from being able to negotiate lower fees.

Rapidly rising interchange fees are a serious problem, costing retailers and consumers an estimated $20 billion or more each year. Kroger this year expects to pay credit and debit interchange fees of approximately $350 million, up more than 215% from five years ago. During that period, Visa has raised Kroger’s interchange rate 11 times. Interchange fees reportedly cost the average U.S. household more than $230 a year.

Other merchants who have joined with Kroger in this new lawsuit include Ahold U.S.A., Albertson’s, Eckerd's, Maxi Drug, Safeway, and Walgreen's. The plantiffs are seeking injuctive and other relief as well as damages dating from January 1, 2004 forward (with that date presumably a result of a release against prior damages negotiated in the earlier settlement of the Wal-Mart class action litigation).

The lawsuit cites seven specific civil antitrust claims against Visa. In addition to attacking the basis for interchange fees, the lawsuit cites specific claims addressing issues such as "Unlawful Tying of Premium Credit Cards to Visa Credit Cards" relating to merchants having to pay higher interchange fees for premium cards, "Unlawful Tying of Network Services" relating to the inability of merchants to obtain network services without having to pay for "payment guarantee services" as well, and a set of "merchant restraints" including "the no-surcharge rule, the honor-all-cards rule, the all-outlets rule, the no-bypass rule, and the no-multi-issuer rule".

Robin Sidel of the Wall St. Journal notes in an article on the lawsuit in today's edition "the suit likely will put a crimp in the first week on the job for John Coghlan, who was named president and chief executive of Visa USA on Monday. Mr. Coghlan, succeeding Carl Pascarella, who is retiring, said he plans to reach out to merchants in his new position.