Wal-Mart urges retailers to reject $6B credit card fee deal

Wal-Mart Stores Inc. is lobbying fellow retailers in the U.S. to reject a $6-billion settlement thatcredit card companies have agreed to pay for charging them unfairly high fees.

Retailers have long alleged that the processing fees credit card companies such as Visa andMasterCard charge them were unfair and open to abuse. The dispute itself dates back to at least 2005, when retailersincluding Kroger Co., Safeway Inc. and Walgreen Co. all launched price-fixing suits against the industry.

But the issue has really gained traction over the past two years as the advent of premium credit cards has seen these fees skyrocket to, in some cases, three per cent of the purchase price of a transaction.

Earlier this month, the two major credit firms settled the major outstanding lawsuits on the issue with opponents who allegecard firmscollude to fix prices unfairly high. But on Tuesday, Wal-Mart urged all retailers even "mom and pop" vendors who are typicallyphilosophicallyopposed to anything the world's largest retailer says to reject the settlement.

The companytakes issue with the settlement for two broad reasons: there's nothing in it that ensures credit card companies won't simply hike rates further to offset any penalties they have to pay, and it asks retailers to waive their rights to fight the credit firms on this issue in the future.

The terms of the settlement allow for retailers to charge customers an extra fee for processing payments by credit card, and the credit card companies have agreed to reduce swipe fees for eight months.That's believed to be worth about$1.2 billion, but the settlement offers no guarantee that fees can't simply get hiked later to offset that lost revenue.

"The proposed settlement would not structurally change the broken market or prohibit credit card networks from continually increasing hidden swipe fees, which already cost consumers tens of billions of dollars each year," Bentonville, Ark.-based Wal-Mart said in a statement. "The proposed settlement would require merchants to broadly waive their rights to take action against the credit card networks for detrimental conduct or acts."

Wal-Mart also says the settlement will stifle "emerging payments innovation" such as the types of mobile payment technological currently in place in this generation of smartphones.