Retailers file suit against debit cards The Washington Post A group of retailers, led by Wal-Mart Stores Inc., is seeking $8.1 billion in damages from Visa and MasterCard in an antitrust suit that accuses the big bank-card associations of using their market dominance to force stores to accept their high-cost debit cards. The case, pending since 1996, received new impetus recently when a federal judge in Brooklyn refused requests for further postponement from Visa and MasterCard and scheduled a hearing next month on whether to treat the case as a class action. The judge also granted a Justice Department request for access to evidence and other records obtained by the retailers for possible use in a government antitrust suit that is pending in another federal court in New York. The private case, which includes many of the nation's largest retailers, involves the "interchange fee" banks charge when stores accept a debit transaction. When a customer uses an ATM card, the transaction is activated by a personal identification number and processed electronically, and typically costs about 8 cents. But if the customer uses a Visa Check Card or MasterCard's equivalent - often the same piece of plastic as the ATM card - the transaction is verified by the customer's signature and processed off-line. In that case, the fee is 1.6 percent of the amount - 64 cents for the typical debit transaction amount of $40, or $1.60 for a $100 transaction. The retailers would like to refuse the Visa and MasterCard debit cards, but both associations have what they call an "honor-any-card" rule requiring retailers to accept any proffered valid Visa or MasterCard. Under this rule, if a retailer refuses a valid debit card, it could lose the right to accept Visa and MasterCard credit cards. "It's a tying case," said Lloyd Constantine, of Constantine & Partners, the retailers' lead attorney. "Visa and MasterCard both say, 'If you take our credit cards, you have to take our debit cards and you can't refuse to take them.' "The issue in a tying case is whether or not (the company involved) has market dominance," he added, and "with a retailer the size of Wal-Mart, if they are forced to take them, then where does a small retailer fall?" Constantine said retailers treat the higher costs as part of their overhead; those costs are paid by all customers, not just Visa and MasterCard debit-card users. Both Visa and MasterCard said the honor-all-cards rule ensures that consumers have the choices they want, and they expressed confidence in the event of a trial. Originally on page 5A in the 1-27-2000 issue of the Daily.