Home Depot has decided enough is enough. The mass merchant is suing MasterCard and Visa for colluding on interchange rates, which it claims it enforces through a monopoly, and for watering down the effectiveness of EMV chips by not requiring PINs in the U.S.
In the lawsuit (read a PDF of the 140 page document), Home Depot’s lawyers state:
“For years, Visa and MasterCard have been more concerned with protecting their own inflated profits and their dominant market positions than with the security of the payment cards used by American consumers and the health of the United States economy. Visa and MasterCard have pushed consumers to use payment card technology that Visa and MasterCard know is defective and subject to fraud and have colluded with each other and with the banks that issue debit and credit cards to do so. They have also unlawfully fixed at high levels the so-called “interchange” fees that merchants must pay when presented with debit or credit cards. As a result of their conduct, United States consumers experience the highest rates of payment card fraud in the world, and United States businesses are subject to the highest payment card related fees in the world.”
The mass merchant goes on to say that MasterCard and Visa have made price fixing a longstanding practice, and are deliberately trying to undermine the fraud protections EMV can provide to ensure no other competition can enter the U.S. market. If Visa and MasterCard enforced the “chip and PIN” model, it argues, then that opens the playing field to other players. Instead, the credit card giants have allowed “chip and sign,” which opens cards to more fraud.
Here’s how the lawsuit phrases it:
“As noted, because debit transactions arose from the ATM (or PIN-based) networks, debit cards often can have more than one network enabled on a card. Yet Visa and MasterCard have perpetuated a regime in which there is a “signature” option on the front of a debit card (usually Visa or MasterCard), with the “PIN” options relegated to the back of the card. The Home Depot and other major merchants generally prefer to route debit transactions over PIN networks so they can foster competition and have the benefit of lower PIN debit prices and more security. Visa and MasterCard, however, have systematically worked together and with their member banks to prevent merchants from being able to take advantage of these options in a significant way. For years, Visa or MasterCard would simply bribe the banks that issue debit cards to install Visa or MasterCard itself as the sole PIN option on the back of the card, using the inflated interchange fees they generated from their price fixing scheme.”
Home Depot had a security breach in 2014, which put 56 million cards at risk. It has a vested interest in a more secure system. However, this lawsuit is going much further than that. If a PIN system is put into place, Home Depot and all other vendors will have options that may lower the interchange rates.
This will be a case to watch. If Home Depot succeeds, retailers everywhere will benefit.