Archive for Saturday, July 16, 2005

Kroger, others sue Visa over price-fixing

July 16, 2005


— Grocery chain operator Kroger Co. said Friday that it and several other large retailers had filed a federal lawsuit against Visa, charging the credit-card issuer with price-fixing and restricting competition in credit-card transactions.

In its lawsuit, Kroger charges Visa USA Inc. and Visa International Service Assn. with colluding with its member banks to illegally fix prices on interchange fees. Credit card issuers such as Visa and MasterCard charge merchants the fees each time a customer pays with a credit card.

Cincinnati-based Kroger also alleged that Visa set rules and restrictions that forbid merchants like Kroger from negotiating lower fees. Interchange fees are a source of hefty profits for the credit card industry.

"It's not fair to Kroger, and it's not fair to our customers, who wind up footing the bill through higher retail prices," Kroger spokesman Gary Rhodes said.

Grocers don't oppose the fees themselves but believe they're not based on market forces as they should be, Rhodes said.

"The fees are a cash cow for Visa," he said.

Kroger owns Hutchinson-based Dillon Stores, which has four Dillons locations in Lawrence. Kroger's chairman and chief executive officer, David Dillon, is a Kansas University graduate.

Last month, a group of small retailers filed a lawsuit in Connecticut federal court against Visa, MasterCard Inc. and several big banks, including Bank of America Corp. and Citigroup Inc., alleging they set "exorbitant" interchange fees.

Foster City, Calif.-based Visa, which is the world's largest payment system and is jointly owned by thousands of banks and other financial institutions, said the latest lawsuit came as no surprise.

"This suit is further evidence that some in the merchant community are on a campaign to shift their costs onto consumers," vice president Paul Cohen said in a statement.

The National Retail Federation, a trade group representing more than 1.4 million establishments, said the lawsuit would draw attention to a "hidden tax" and might affect the practice in credit card companies other than Visa.

Most consumers, who pay interest on credit card balances, don't know about the fees ranging from a few pennies to a few dollars that stores pay on each transaction, said Tracy Mullin, the group's president and chief executive.

"That drives up prices for everyone and is especially unfair for customers who pay cash," she said.

Kroger, the nation's biggest grocery chain after Wal-Mart Stores Inc. with 2,524 stores in 32 states, filed the lawsuit in U.S. District Court for the Southern District of New York. Other plaintiffs in the lawsuit are Ahold USA Inc., Albertson's Inc., Eckerd Corp., Maxi Drug Inc., Safeway Inc., and Walgreen Co., Kroger said.


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