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Home Depot v. MasterCard and Visa: Will It Affect Your Small Business?

By Christopher Coble, Esq. on June 16, 2016 | Last updated on March 21, 2019

If your small business handles enough credit card transactions, you already know how much of a hassle they can be. There's the processing equipment, the interchange fees, the data security issues, and the risk of fraud, all of which can fall on the small business owner. But a slightly larger business has decided to fight back.

Home Depot filed a federal antitrust lawsuit against Visa and MasterCard, claiming the two largest credit card issuers colluded to hike transaction fees and suppress new chip-based card technology that can prevent fraud. So what does this mean for credit cards at your small business?

Fees and Chips

While banks, credit unions, and credit card companies issue debit and credit cards to consumers, Visa and MasterCard set the interchange fees collected by banks. Home Depot says it paid $750 million in bank-card acceptance fees last year alone and claims the two companies engaged in price-fixing to set interchange rates abnormally high and to prevent competition for acceptance at merchants. "These fees are nothing other than blatant efforts to prevent competition," the lawsuit alleges, "and Visa and MasterCard announced them in lockstep to make sure issuing banks know they face retribution for supporting PIN debit options."

Home Depot also claims Visa and MasterCard blocked new fraud-resistant card technology -- a combination of personal identification numbers and EMV chips -- for years, leading to more fraud and more costs to consumers and businesses:

Visa and MasterCard know perfectly well that a signature alone, without the additional step of requiring a PIN, provides virtually no protection against many types of payment card fraud ... 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 companies' reticence to adopt new, more secure card technology may also have been based on profits: Home Depot claims that banks can collect higher merchant fees for signature-based credit-card transactions than PIN-based ones. "While chip-and-PIN authentication is proven to be more secure, it is less profitable for Visa, MasterCard," the lawsuit alleges, "and their member banks and it provides a greater threat to their market dominance."

Large Fish, Even Larger Pond

Visa and MasterCard settled similar charges in 2012, paying an estimated total $7.25 billion to hundreds of retailers. Home Depot opted out of that settlement, as did other stores like Target, Walmart, and 7-Eleven. Walmart settled its own lawsuit separately, and there are several other similar lawsuits filed against Visa and MasterCard over exorbitant transaction fees and the requirement that merchants adopt the new chip technology.

It's all enough to make you want to take your store back to the good old days of cash only. Although Home Depot may be fighting the good fight, another settlement doesn't necessarily mean that credit card fees will come down for small businesses across the board. And you still have to figure out this whole chip thing.

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