Home Depot’s Sideshow Bob Moment
In the lead-up to the liability shift for merchants that can’t process EMV chip card transactions, we heard a lot from merchants about the costly burden of upgrading equipment. Now that the deadline has passed, we are hearing a lot of merchants say they love EMV, they just hate the fact that Visa and MasterCard transaction standards mandate that chip transactions be completed with a member’s signature and not a PIN. Interchange fees transacted over PIN networks are cheaper than interchange fees executed over signature networks.
The latest front in this stage of the battle was opened earlier this week when Home Depot filed a lawsuit in Federal District Court in Atlanta claiming that Visa and MasterCard have colluded for years to deny access to chip and pin networks, which Home Depot argues would be safer for consumers and cheaper for merchants (THE HOME DEPOT, INC. and HOME DEPOT U.S.A., INC., v. VISA INC., VISA U.S.A. INC. et al 1:16-cv-01947). By the way, this is the same Home Depot being sued for costs related to a data breach. It reminds me of this classic scene from the Simpsons in which Sideshow Bob gets released from prison and runs for office claiming that Mayor Quimby is soft on crime.
According to the plaintiffs: “Visa and MasterCard have acted to keep a defective product in place — signature-authenticated cards — in order to maintain their supra-competitive profits that are tethered to this faulty technology. Visa’s and MasterCard’s success in forcing merchants and consumers to accept and use technologically-inferior, and in fact defective, products — including products that Visa and MasterCard knew would increase fraud — is further evidence of their substantial market power.”
Another criticism of the network rules is that they require merchants “to honor the cards of all card issuers.” This is, of course, is a great example of why lawsuits like this are so dangerous for smaller institutions. Imagine a world in which the Home Depots and Walmarts could enter into exclusive deals with banks of their choosing? That doesn’t sound all that consumer friendly to our members.
See you in Saratoga!