Kroger Weighs Widening Unit's Planned Ban on Visa Credit Cards

(Bloomberg) -- Kroger Co., the largest U.S. supermarket chain, is considering expanding a ban on Visa credit cards that one of its California subsidiaries plans to put into effect next month.

The retailer’s Foods Co. Supermarkets unit will stop accepting the cards on Aug. 14 at 21 stores and five fuel centers in Central and Northern California, including in San Francisco and Sacramento, in a dispute over fees, the Cincinnati-based grocery chain said in a statement Monday.

“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,” Chris Hjelm, Kroger’s chief information officer, said in an interview. “It’s unfortunate. We’d prefer a different outcome.”

The spat is the latest battle over the $90 billion that U.S. merchants pay each year in swipe fees. Major retailers have long looked for ways to cut down on such charges, including by lobbying lawmakers to lower the rates and through technology upgrades that avoid Visa Inc. and Mastercard Inc. entirely. A burgeoning group of financial-technology startups are also attempting to offer cheaper alternatives for merchants.

Visa’s rates and fees are among the highest of any credit card brand, Foods Co. said in the statement, adding that savings would be passed to customers, who will still be able to use Visa’s debit cards, as well as cards from Mastercard, Discover Financial Services and American Express Co.

‘Reasonable Solution’

“When consumer choice is limited, nobody wins,” Visa said in a statement. “Our goal is to protect the interests of our cardholders to ensure they can use their Visa credit cards wherever they shop. Visa remains committed to working with Kroger to reach a reasonable solution.”

Kroger sued payment-card companies over fees in 2016 in the aftermath of the U.S. switch to chip-and-PIN technology. Foods Co.’s decision is similar to a ban Walmart Inc. implemented two years ago in some of its Canadian stores when the retailer clashed with Visa over card fees. That dispute ended when the two companies reached an agreement about seven months later.

To contact the reporter on this story: Jenny Surane in New York at jsurane4@bloomberg.net

To contact the editors responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net, Steve Dickson, Steven Crabill

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