Economic News
Grocery Chain Reverses Swipe Fee-Related Visa Card Ban
After months of turning away Visa cards at their Foods Co. and Smith’s locations in several states, the chains’ parent company Kroger has announced that Visa will once again be accepted at all of its stores. Although a spokesperson for the company confirmed the news to Business Insider, they declined to comment on the reason for the reversal. Previously the company accused Visa of charging “excessive” fees on transactions and alleged that such fees would “drive up food prices for all customers.”
The Visa-Kroger feud began last summer when the California-based grocer Foods Co. announced that it would disallow Visa payments at its 21 locations. At the time Kroger spokesman Chris Hjelm declared, “It’s pretty clear we need to move down this path, and if we have to expand that beyond Foods Co., we’re prepared to take that step.” In April, the company partially made good on that threat, adding the Smith’s Food & Drug chain to their Visa ban. Smith’s operates 130 locations across seven states. That ban was accompanied by a statement from Kroger CFO Mike Schlotman where he stated, “Visa has been misusing its position and charging retailers excessive fees for a long time. They conceal from customers what Visa and its banks charge retailers to accept Visa credit cards. At Smith’s, Visa’s credit card fees are higher than any other credit card brand that we accept.” Visa responded, saying, “It is unfair and disappointing that Kroger is putting shoppers in the middle of a business dispute.”
According to estimates, U.S. retailers spend upwards of $90 billion in so-called “swipe fees” annually. However few consumers may be aware that using a credit or debit card results in stores paying these processing fees (a notable exception may be at some gas stations where cash transactions are “discounted”). Additionally the fight over swipe fees is actually just a part of a larger battle retailers have been engaged in with credit card companies. For example the National Retail Federation and others have been lobbying lawmakers to give companies a say in setting standards for payment securities and technologies. Of course, in response, card companies have said that such efforts are really just about retailers paying lowering fees.
With Kroger’s latest decision, what once seemed like it would be a true challenge to Visa has faded. While it’s unclear if the chain gained any concessions from the card company, it’s probably safe to assume that public pressure played a role. As a result it seems a true turning point in the swipe fees war is yet to come.
