What’s Home Depot’s Beef with MasterCard and Visa?

Dec 22, 2016

Another week, another payments industry lawsuit. Although Wal-Mart is typically considered the sharp elbowed retailer, the Home Depot has pulled out the big guns this time too. The Atlanta-based merchant’s suit against MasterCard and Visa works in all the magic words designed to up the ante: “price fixing,” “conspiracy,” “defective product,” “bribe the banks,” “anticompetitive conduct.” Hmmm- I wonder how they really feel about the card networks. Further, by alleging antitrust violations Home Depot is making the case for treble damages (of an amount yet to be determined).

It’s hard to imagine the Wal-Mart and Home Depot complaints weren’t coordinated in some fashion, although they’re quite different. Most notably, Home Depot is suing both Visa and MasterCard (Wal-Mart names Visa only), and is broader in scope. To some extent Home Depot’s “defective product” arguments come across as fighting yesterday’s battle, since they largely relate to magnetic stripe technology that’s already being phased out. In many ways the suit reads like a sequel to earlier disagreements between the parties- Home Dept opted out of a 2012 settlement of a 2005 class action lawsuit against the networks over interchange fees.

In some areas, however, it’s Home Depot that seems to have the stronger arguments. Their 140-page filing looks daunting, but it opens with a surprisingly readable 12-page synopsis that paints a picture of new fee structures being launched coincidentally with the Durbin Amendment, and tactics to limit network options for PIN authorization. Visa may face an interesting challenge explaining these in court, while waging a simultaneous battle with Wal-Mart- their best arguments in one suit may not necessarily serve their purposes in the other.

Don’t expect a resolution to either of these squabbles anytime soon- the most important impacts are likely to emerge in the court of public opinion rather than the US court, but the proceedings will cast a pall over the payments ecosystem for the foreseeable future.

In other news….

MCX’s low-profile announcement that it was ending its CurrentC mobile wallet pilot and redirecting resources toward working with financial institutions (think Chase Pay) was unsurprising given the consortium’s rocky road. But does its failure reflect a repudiation of the merchant-led wallet concept, or is it merely further proof of the inherent challenges driving innovation through a multi-party consortium? Glen’s CUNA article further explores these topics, as does our podcast.

And the recent batch of feature announcements at Apple’s annual World-Wide Developers Conference (WWDC) includes an expansion of Apple Pay to online commerce, setting up a showdown with PayPal. The functionality sounds impressive- before a payment is executed, a prompt is send to an iPhone or Apple Watch for validation. It won’t be available until the fall, however, and requires the Safari browser, which will limit the addressable market. On our podcast John weighs in on Apple’s non-payment announcements, which are also recapped in this TechCrunch article.