Stock markets are slightly higher today after the Commerce Department reported that personal income and spending both rose 0.3% in February. Considering the weather the country dealt with last month, any growth from consumers should be seen as a positive.
At 3:30 p.m. EDT, the Dow Jones Industrial Average (DJINDICES:^DJI) had risen 0.22%; 22 of 30 components were trading higher on the day.
Wal-Mart and Visa go to court
The big news within the Dow today was that Wal-Mart (NYSE:WMT) is suing Visa (NYSE:V) over the card-swiping fees on each transaction. Wal-Mart says that it has lost at least $5 billion in damages due to price fixing by the payment processor and the banks it works with. As this is an antitrust case, the company is seeking $15 billion in damages.
It's not surprising to see Wal-Mart sue given that it opted out of a $7.25 billion settlement between retailers, Visa, MasterCard, and major banks. The world's largest retailer has the clout to go it alone and demand more changes in fee structures than the settlement could. Target and Amazon.com also opted out, so Visa and MasterCard could have additional eye-popping lawsuits coming.
It's extremely tough to prove price fixing; this battle has dragged out for nearly a decade, so it certainly isn't an open and shut case. The bottom line is that Visa and MasterCard have very powerful networks, and even a company like Wal-Mart doesn't have a lot of power to negotiate rates with them.
While the lawsuit looks bad today, and Visa's shares are down 2%, I wouldn't get too worried because the long-term business is still intact -- and that's where the earnings power will come from for credit card companies. Strategically, the company is in a great place: short of retailers coming up with another payment processing service, there's really no alternative to Visa and MasterCard long term.