Canadian retailers watch Walmart's battle with Visa

Retailers hopeful that dispute will highlight credit card fees

Canadian retailers are watching with both hope and unease Visa's very public battle with Walmart.

An association representing convenience-store owners says they are pleased that the world's largest retailer has highlighted hefty credit card fees, but is worried Walmart will gain an even larger competitive advantage.

"If a big retailer like Walmart is faced with the challenge of paying these fees, you can only imagine how small businesses are facing this with very little leverage or the ability to negotiate,'' said Alex Scholten, president of the Canadian Convenience Stores Association.

He said his members pay between 1.5 and four per cent for purchases made with credit cards, likely far in excess of Walmart.

"If Walmart is the only retailer able to get a good deal because of their buying power, it certainly isn't something we're happy about.''

Visa has accused Walmart of using consumers as leverage to strike an even better deal by threatening to ban the popular credit card from its Canadian stores.

"I was surprised that they would publicly state that they were going to put their consumers in the middle of this business dispute,'' Visa Canada president Rob Livingston said in an interview Thursday.

He declined to speculate whether Walmart's move might have been motivated by efforts to push its branded MasterCard. Walmart did not reply to a request for comment.

After months of negotiations, Walmart quietly announced last weekend that "unacceptably high fees'' has prompted it to stop accepting Visa cards beginning July 18 at stores in Thunder Bay, Ont.

The retailer then plans to reject the cards at its more than 400 Canadian locations.

Visa defended itself in an open letter published in several Canadian newspapers, saying it offered Walmart one of the lowest rates of any merchant in Canada. But the world's largest retailer wanted more.

"And they are using their size and scale to give themselves an unfair advantage,'' said the unsigned letter.

Livingston said Visa presented what it considers a "very fair offer'' but doesn't feel it is appropriate for Walmart to get a rate lower than charities, educational institutions and utilities.

"We are looking to do whatever we can reasonably do to help Canadians shop wherever they want to use their Visa cards, including Walmart.''

Convenience store chain Alimentation Couche-Tard said it's sympathetic to Walmart's move after lobbying for years to reduce credit card fees in Canada, which are among the highest in the world.

"Lower credit card fees would mean lower costs to the consumer,'' said spokeswoman Karen Romer.

The Retail Council of Canada says high credit card fees are unacceptable to retailers.

"I'm not suggesting that the floodgates are about to open on this,'' said Karl Littler, vice-president public affairs. ``(But) there's potentially going to be others who will make similar decisions in the future.''

The retail council, which represents retailers including Walmart, is calling on the federal government to intervene to mandate lower fees for all merchants. Visa and MasterCard voluntarily agreed in late 2014 to reduce so-called interchange fees by about 10 per cent, or $400 million, under the threat of action by the previous Conservative government.

Visa said it lowered fees further in April for small businesses including grocery stores, corner bakeries, butchers and ice cream stores.

Littler called the cuts modest since Canadian fees are still five times higher than in Europe and three times the levels in Australia.

In the House of Commons on Wednesday, Finance Minister Bill Morneau said the government is waiting for a report on the voluntary agreement from Visa and MasterCard before deciding "how we can ensure this market stays competitive in the future.''

Every retailer, especially those with thin margins, are looking at ways to cut costs and offer more value to customers, said Charlie O'Shea, lead retail analyst with Moody's Investors Service.

"You will see more retailers addressing the issue over the next 12 months,'' he said from New York.

Still, O'Shea said he thought Costco Canada's switch in late 2014 from American Express to MasterCard would have signalled bigger changes to come.

"That in my view was the deal that would 'wake up' other retailers. The Walmart deal is important but the Costco deal was the first.''

Livingston wouldn't say if other Canadian retailers are also seeking fee reductions.

"I honestly believe that other retailers aren't going to be interested in putting their customers at the centre of a business dispute.''

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