CHAINS SUE VISA OVER INTERCHANGE FEES

Mark Hamstra

NEW YORK -- Four of the nation's largest supermarket companies and three of the largest drug store chains filed a federal lawsuit in the U.S. District Court for the Southern District of New York here accusing credit-card giant Visa of price fixing and restricting competition related to transaction fees.

The suit was filed by Kroger, Safeway, Albertsons, Ahold USA, Eckerd Corp., Maxi Drug and Walgreen against Visa USA and Visa International Service Association and alleges that Visa unlawfully sets so-called "interchange fees" and does not allow chains to negotiate lower rates. The suit seeks "injunctive relief and unspecified damages."

Paul Cohen, vice president, Visa USA, said in a prepared statement that the company could not comment specifically on the lawsuit but noted that Visa's rates are determined by "a highly competitive marketplace."

In announcing the lawsuit, Paul Heldman, senior vice president and general counsel, Kroger, called collective setting of interchange fees by Visa and its member banks "horizontal price fixing that leads to higher retail prices for our customers."

Kroger said it expects to pay debit and credit interchange fees of about $350 million this year, up more than 215% from five years ago. Kroger said Visa raised the retailer's interchange rate 11 times during that period.

"We feel very strongly that the issue of credit-card and debt-card fees is one that affects retailers of all sizes," said Bill Greer, a spokesman for Food Marketing Institute, Washington, which made the fees a focal point of its 2005 conference in May. FMI participated in a previous class-action lawsuit against Visa and MasterCard that resulted in lower debit-card fees.

Lloyd Constantine of Constantine Cannon, New York, who was lead attorney for the retailers in the previous lawsuit, told SN last week that the more recent suit could be an attempt by the chains involved to negotiate lower interchange fees for themselves. It could also evolve into a class-action suit, he said.

The lawsuit could also be "a shot across the bow of MasterCard," he said.