- The Washington Times - Monday, April 28, 2003

NEW YORK (AP) A long-simmering lawsuit pitting Wal-Mart Stores Inc. and thousands of other American retailers against Visa USA and MasterCard International concerning their debit-card policies goes to court today.
A victory for the merchants in the case, which was filed in 1996, could change the way consumers pay for their purchases of goods and services, analysts say.
The retailers have accused the big card associations of violating antitrust laws by illegally tying the acceptance of debit cards to their credit cards and by attempting to monopolize the debit-card service market.
If the merchants prevail, Visa and MasterCard could be liable for triple damages as high as $45 billion by some calculations.
Visa and MasterCard deny any wrongdoing and say their "honor all cards" policies are necessary to guarantee that consumers have payment choices. The policies require retailers that accept the card associations' credit cards to accept their debit cards as well.
"We believe that in the more than three decades since 'honor all cards' came into being, it has delivered enormous benefit to consumers," Daniel Tarman, a spokesman for Visa, said in an interview.
That is because consumers know that when they see a Visa sign on a merchant's door, their Visa cards will be accepted whether they want to charge something or use a debit card.
Mr. Tarman accused Wal-Mart of "driving this case for business, not legal, reasons" and argued that Wal-Mart, which is the nation's largest retailer, and others, including Sears and Safeway, were trying to dictate how consumers pay for their purchases.
At issue is the way debit-card transactions are processed. Visa and MasterCard want merchants to clear transactions on the associations' systems, for which they collect a fee. Such "off line" transactions require consumers to sign their debit card receipts, just as they do their credit card receipts.
But independent, regional networks have sprung up to clear debit transactions that have been authenticated when consumers punch in a PIN, or personal identification number. Clearing PIN transactions generally costs less than a third of clearing the signature transactions.
Although retailers pay the clearing fees, the cost ultimately is passed on to the consumer.
Retailers such as Wal-Mart contend that they have been forced by the "honor all cards" policies to pay excessive clearing fees to Visa and MasterCard, which they want refunded. The retailers want the ability to accept Visa and MasterCard charge cards, but not necessarily their debit cards. That would free them to support lower-cost debit-card issuers that would operate with only PINs.
David Balto, a lawyer at White & Case LLP in Washington and a former government antitrust enforcer, said that "because of Visa's and MasterCard's exclusionary rules, consumers have had foisted on them a product that's unsafe at any price and too costly."
Mr. Balto says that PIN systems are more secure and that signature-based systems are old-fashioned. He asked, "Why would you want to go by steam train when you can take an airplane?"
He added that he believed a ruling against Visa and MasterCard would result in "an explosion of new products and new competitors, maybe different payment methods that haven't even been thought about yet."

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