Kroger Sues Visa Over PIN Debit Transactions -- 2nd Update
June 27 2016 - 6:18PM
Dow Jones News
By Robin Sidel
Kroger Co. sued Visa Inc. over debit-card transactions, saying
the payment network has levied fines against it and threatened to
raise fees and cut off its acceptance of debit cards if the grocery
chain doesn't allow customers to verify purchases with a signature
instead of a personal identification number.
The lawsuit represented the latest step in a burst of legal
activity between merchants and the card industry, which have been
fighting over fees and other issues for decades. It comes after
Wal-Mart Stores Inc. sued Visa in May over similar debit-card
issues.
The move also comes as merchants are installing new payment
equipment to accept cards that are embedded with a computer chip
rather than just a magnetic stripe. The chip-enabled cards, which
are considered safer than the traditional type, are widely used
around the world.
Kroger said the dispute began after it was informed by Visa that
the configuration of its new terminals didn't comply with Visa's
rules. Like Wal-Mart, the grocery chain required customers to
verify debit-card purchases with a PIN instead of a signature.
Visa's rules require merchants to allow customers to choose
between a PIN and a signature verification.
"Our goal is to provide our customers with a safe and secure
payments environment, and two layers of protection are better than
one," Chris Hjelm, Kroger's executive vice president and chief
information officer, said in a statement.
A spokeswoman for Visa said the company was reviewing the
lawsuit and would respond "in due course."
Wal-Mart and Kroger say PIN-debit transactions are more secure
than when customers sign for the transaction, which can be easily
copied. The PIN transactions can also be cheaper for the merchant
because they have a choice of routing the transaction among a
number of competing networks.
Kroger operates more than 2,700 stores in 35 states and operates
under a number of brands, including Ralph's, Harris Teeter and Fred
Meyer.
Kroger said Visa levied fines of $7 million against it after it
didn't change its practices and told the merchant it would raise
the fees it charges to process debit transactions. Kroger also said
Visa threatened to cut off Kroger's ability to accept all Visa
debit cards.
The grocery chain said it can't reprogram "tens of thousands" of
terminals to give cardholders the choice between a signature and a
PIN. Kroger says it rang up $29 billion in Visa debit-card
transactions last year, noting in the lawsuit that cutting off its
ability to accept Visa debit cards "threatened catastrophic
consequences for Kroger's business."
"There is no rational basis for Visa to cut off Kroger's ability
to accept any or all Visa debit cards unless Visa intended to
punish Kroger, " the grocery chain said in the lawsuit that was
filed in U.S. District Court for the Southern District of Ohio.
Write to Robin Sidel at robin.sidel@wsj.com
(END) Dow Jones Newswires
June 27, 2016 18:03 ET (22:03 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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