Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Home Depot alleges Visa, MasterCard engaged in conspiracy to keep credit cards less secure, (Jun 16, 2016)

By Jody Coultas, J.D.

The Home Depot, Inc. filed suit against Visa Inc. and MasterCard Incorporated under federal and state antitrust laws over credit card security and fees in the federal district court in the Northern District of Georgia (The Home Depot, Inc. v. Visa Inc., June 13, 2016).

Home Depot points out that a proven method for reducing card fraud, chip-and-PIN technology, is not used in the United States to a significant degree, even though it is widely used around the world. Chip cards have been used in other countries for decades, and often require a pin rather than a signature.

Visa and MasterCard have allegedly pushed consumers to use technology it knows is defective and subject to fraud, and colluded with each other and with the banks that issue debit and credit cards to do so. The credit card companies and their member banks have allegedly acted in concert to prevent the adoption of chip-and-PIN authentication. Chip-and-PIN authentication is less profitable for Visa, MasterCard, and their member banks, allegedly providing a greater threat to their market dominance. Consumers and merchants end up bearing the costs of fraud related to using unsecured technology.

According to the complaint, the credit card companies’ new chip-and-signature standards have done little more than help Visa and MasterCard strengthen their hold over the credit and debit markets, to the detriment of merchants and consumers. When customers insert a chip-based debit card into a new terminal, terminal specifications established by Visa and MasterCard steer customers away from PIN options toward Visa’s or MasterCard’s signature debit products.

Visa and MasterCard allegedly unlawfully fixed so-called "interchange" fees that merchants must pay when presented with debit or credit cards. Visa and MasterCard have argued interchange fees are necessary to reimburse Issuers to motivate them to issue General Purpose Payment Cards. Home Depot argues that General Purpose Payment Card systems have functioned successfully without Interchange Fees in the United States and internationally. Moreover, the Interchange Fees are not based on cost, and offer no procompetitive justification to offset the anticompetitive harm, according to the lawsuit.

Home Depot claims that Visa and Mastercard violated Section 1of the Sherman Act by horizontally fixing prices, vertically retraining prices, and agreeing not to compete in the markets for credit card and debit card services. The companies also allegedly violated Section 2 of the Sherman Act by monopolizing the relevant markets. The complaint seeks damages, treble damages, interest, prejudgment interest, attorney fees and costs, and any other just and proper relief. Home Depot also seeks to enjoin Visa’s Fixed Acquirer Network Fee, and seeks a jury trial.

Wal-Mart filed a similar complaint last month.

Attorneys: Stephen R. Neuwirth, Steig D. Olson, and Alicia K. Cobb (Quinn Emanuel Urquhart & Sullivan, LLP) and Frank M. Lowrey IV and Ronan P. Doherty (Bondurant Mixson & Elmore, LLP) for The Home Depot, Inc.

Companies: The Home Depot, Inc.; Visa Inc.; MasterCard Incorporated

News: Antitrust GeorgiaNews