WMT Walmart Inc

By Sarah Nassauer and Robin Sidel 

Wal-Mart Stores Inc. on Monday began blocking the use of credit cards from Visa Inc. at three of its Canadian stores, marking another battle in an escalating war between the retail behemoth and credit-card companies.

Wal-Mart said it was unable to agree on terms with Visa and that the fees it pays when shoppers use the cards are too high. It has stopped accepting Visa cards at locations in Thunder Bay, Ontario, and plans to "roll out the change in phases across Canada," where it has 405 stores, said Alex Roberton, a spokesman for Wal-Mart.

Mr. Roberton said the company has "not set a timeline yet" for shutting down Visa at other Canadian stores.

"Visa remains committed to doing everything reasonable to ensure Canadians can use their cards everywhere they wish to shop -- including at Wal-Mart stores," said a Visa spokeswoman. "We encourage shoppers to use their cards at the more than 5,200 stores in Thunder Bay that accept Visa."

In June, Wal-Mart posted signs at the front of its Thunder Bay stores saying it planned to shut off Visa in July. It is unclear why Wal-Mart chose Thunder Bay, a city of 110,000 on the banks of Lake Superior, because it has "the right leadership teams and infrastructure to ensure as seamless a transition for customers as possible," said Mr. Roberton.

One customer posted on Facebook to express concern that the retail chain would stop accepting Visa at its other Canadian stores. "Every penny we save through Visa fee reductions allows us to lower prices for our customers," Wal-Mart said in response.

The dispute is another salvo in a long-running, but recently heated battle between Wal-Mart and credit-card companies, largely over the fees Wal-Mart pays and the cybersecurity of new cards. Earlier this year, Wal-Mart and Kroger Co. filed separate lawsuits against Visa saying that when shoppers use new chip-enabled debit cards they should be able to type in a personal identification number, or PIN. Visa's rules require that customers also have the choice of signing. Retailers say signing is more expensive and less secure than a PIN.

Meanwhile, a federal appeals court in June panel threw out a $7.25 billion antitrust settlement between Visa and MasterCard Inc. and millions of retailers after determining that some of the merchants covered by the pact weren't adequately represented, ending a class-action lawsuit that had stretched over a decade.

In Canada, around 59% of people say Wal-Mart is right to cut off Visa from stores, according to a recent poll from the Angus Reid Institute, a Canadian polling agency. However, almost half of Wal-Mart shoppers surveyed who use Visa said they are less likely to shop there if the card is banned.

The companies worked to win over public opinion Monday. On Twitter, Visa's Canadian account took a jab at Wal-Mart as the world's largest retailer, noting that Visa is still accepted at many stores in Thunder Bay "most of them local small businesses."

Visa also started offering a $25 gift cards to cardholders who spend at least $75 on their cards at grocery stores in Thunder Bay. The cardholders have to enroll their cards online to receive the virtual gift card.

"We hope this eases the inconvenience for Visa cardholders in Thunder Bay who cannot use their card everywhere they may want to," a Visa spokeswoman said. The website offering the promotion doesn't mention the Wal-Mart action.

It is fairly rare for a merchant to cut off acceptance of a single card brand except in the case of a contract's expiration, such as when Costco Wholesale Corp. recently stopped accepting American Express cards because it struck a new deal with Citigroup Inc. and Visa Inc.

Indeed, AmEx has been the card brand that has been most often at the center of such merchant action. Some 250 restaurants in the U.S. cut off AmEx acceptance in 1991 as part of a fee revolt called "The Boston Fee Party" because it began in Massachusetts.

Walgreen Co. threatened in December 2004 to stop taking AmEx as of the next January, but the drugstore chain later changed its mind after reaching a new fee arrangement with the card company.

Although Thunder Bay may be less well-known than other Canadian cities, it is getting a tourism boost this week because it is hosting the Can-Am Police-Fire Games. The Olympic-style event for law-enforcement officers and firefighters, is taking place in Thunder Bay through July 24.

The two companies have held ongoing conversations since Wal-Mart announced its Thunder Bay plans in June.

Write to Sarah Nassauer at sarah.nassauer@wsj.com and Robin Sidel at robin.sidel@wsj.com

(END) Dow Jones Newswires

July 18, 2016 14:01 ET (18:01 GMT)

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