Visa Hits Wal-Mart in Court with a Pre-Emptive Interchange Strike

Going on the offense for the second time in less than a month, Visa Inc. on Wednesday filed a lawsuit against Wal-Mart Stores Inc. seeking to prevent the world’s largest retailer from suing Visa over interchange.

Bentonville, Ark.-based Wal-Mart is mulling a legal challenge to the bank card networks on grounds that the way they set interchange violates antitrust laws. Visa’s new suit in U.S. District Court in Brooklyn, N.Y. doesn’t ask the court to actually forbid Wal-Mart from suing, but it does seek a declaration that the Visa conduct Wal-Mart would question has been legal, making a lawsuit pointless.

“A declaration in Visa’s favor against Wal-Mart is necessary to prevent the continuation of endless, wasteful litigation between the parties,” Visa’s complaint says. “Put simply, Visa seeks finality in its dispute with Wal-Mart.”

The background of the latest dispute is the pending $7.25 billion settlement of an 8-year-old merchant class-action suit against Visa, MasterCard Inc., and some of their banks that challenged the interchange-setting process as anticompetitive. Wal-Mart has opted out of and objected to the settlement as have, reportedly, about 7,000 other merchants and trade groups. Objecting merchants say the settlement would give the networks a free hand by preventing retailers from challenging interchange and network rules in the future. Visa filed its suit in the same Brooklyn federal court where the settlement is under review by U.S. District Court Judge John Gleeson.

“We are disappointed that Visa chose to file this unwarranted and unsupportable lawsuit in retaliation for our decision to opt out and object to an unfair settlement agreement,” Wal-Mart said in a statement on Friday morning. “The proposed settlement would allow credit card companies and big banks to perpetuate a broken system that costs consumers billions of dollars each year, and we, like more than 7,000 other conscientious merchants who have opted out, cannot go along with it.”

Just before Memorial Day, Visa, MasterCard, and nine banks filed a lawsuit in the Brooklyn court seeking a declaration that their conduct with respect to interchange and network rules did not violate federal antitrust laws. The defendants in that action are 10 retail trade groups and merchants that were named plaintiffs in the original litigation that dates back to 2005 but that opted out or declared their intentions to opt out of the damages part of the settlement. Wal-Mart is not a defendant in that suit.

According to Visa, the issues Wal-Mart is concerned with were litigated in a major debit card interchange lawsuit led by Wal-Mart that was settled in 2003 for more than $3 billion, and in the pending interchange litigation settlement.

“Wal-Mart, however, has opted out of the settlement and has publicly opposed and denigrated the interchange settlement at every opportunity, apparently preferring to continue litigating with Visa, seemingly forever,” Visa’s complaint says.

Visa’s new suit against Wal-Mart seeks a court declaration that Visa’s default interchange rates do not violate federal antitrust laws and re-hashes many of the arguments the networks and banks made in the May lawsuit.

“To me, there’s nothing new here and it parallels the complaint for declaratory judgment that they filed a few weeks ago,” says attorney Anita Boomstein, a partner at Hughes Hubbard & Reed LLP in New York.

Other retailers led by Target Corp. recently filed a separate interchange challenge against the card networks in U.S. District Court in Manhattan.