Visa’s Monopoly Inhibits Retailer Profit Margins (Bloomberg)
In what can only be described as a battle of heavyweights, Wal-Mart Stores Inc. (WMT) has sued Visa (V) Inc. for $5 billion in damages caused by rate manipulation. The world’s largest retailer claims that its largest card issuer is colluding with banks to fix transaction fees. Wal-Mart is claiming Visa holds a practical monopoly on credit card use because it requires retailers to accept all issuers’ Visa-branded cards, thereby eliminating any benefits the company might receive from competitive pricing. So how does this affect you as an investor? Well, if you’re paying more for every Visa transaction, you have less to invest. More directly, if Wal-Mart wins the law suit, Visa shareholders could see an effect on the company’s bottom line and ultimately its share price. And for a company that’s witnessed 27 percent appreciation in its shares over the last year, the loss of the lawsuit could hurt. In pre-market trading, Visa was down 1.22 percent. Paul Cohen, a spokesman for Visa, declined to comment on the Wal-Mart complaint.