16 Dec Small Businesses Forced into Chip Technology Assert Violation of Antitrust Law
Major credit card companies in the U.S. are facing an antitrust lawsuit from small businesses and retailers across the country. The suit is based on the theory that credit card companies have worked in concert, against the provisions of U.S. antitrust law, to force small businesses to adopt credit card chip technology. If successful, damages in this case could exceed billions of dollars in order to compensate small businesses across the country.
Chip technology has been widely implemented to help protect consumers from credit card fraud. Replacing magnetic strip technology, however, has proven to be an inconvenient and costly endeavor. For example, the increased waiting period required to complete consumer transactions has been one major drawback.
Another major drawback is liability. According to the lawsuit, the credit card companies colluded to force all American companies to adopt the technology by making them bear the risk of loss in its absence. As a result, small businesses are now being held responsible for stolen credit card information if they have not implemented chip technology, whereas in the past, the banks would have covered these kinds of losses.
These allegations culminated in the lawsuit accusing the credit card companies of forming an “illegal trust in restraint of trade.” The judge remarked that, even as a former antitrust prosecutor, he has never seen evidence as strong as the CEO of Visa admitting that the largest companies met in a room to discuss uniform terms for chip technology. If the judge’s comments are any indication, the ultimate legal resolution does not look good for these large companies.
The Sherman Antitrust Act is the product of economic turmoil and social revolution during the late 19th and early 20th centuries. It was passed in a business climate that promoted amalgamation and working together to form “trusts” that eliminate free market competition. A popular misconception is that the Act makes monopolies illegal, but that is not always true. There is no antitrust violation when the monopoly is legally acquired.
The Act has been modified several times since its enactment. Today, the primary provision seeks to give each business the opportunity to compete in the marketplace on the basis of price, quality, and service. The rationale behind this policy is to benefit the consumer. The theory is that when businesses compete for consumer dollars based on price, quality, and service, the American consumer gets the best product at the best price.
The antitrust provisions are some of the most powerful in the federal code. They can be used in business as a sword or a shield, as well as lead to both criminal and civil consequences for the unwary. Antitrust issues, such as price-fixing and market allocation, can arise before a transaction even occurs. The structure of mergers and acquisitions, in particular, require careful consideration and analysis. Thus, it is imperative that businesses of all sizes understand how U.S. antitrust law implicates them.
Before planning the next step for your business venture, be sure to obtain the legal assistance required to address your antitrust concerns by contacting us at Royse Law Firm. Our attorneys are experienced in an array of business transactions, ranging from cash sales to international multi-party mergers. We look forward to providing your company with the expert representation it needs.