Antitrust Case Tip of the Iceberg

The giant credit card companies in the U.S. are facing a giant lawsuit from small businesses and retailers across the country. The suit is based on a theory that the companies have worked in consort, against the provisions of U.S antitrust law, to force small businesses into adopted credit card chip technology. If successful, this case could reach many billions of dollars in damages, and expand to nearly all small businesses in the country.

The origins of this case are based in the newest kind of credit card technology, using chips. These chips embedded in a credit card do not prevent fraud from happening, but greatly reduce the likelihood when compared to the magnetic strips previously used. But there have been drawbacks, such as the time it takes to use a chip versus a magnetic strip.

The other drawbacks of this technology are the basis for the suit against the large credit card companies. According to the suit, the biggest credit card companies got together and came up with a plan to force every other company in the country to adopt the technology. Allegedly, now small businesses are held responsible for stolen credit card information if that business has not adopted the chip, where in the past banks covered those losses.

These and other allegations culminated in the lawsuit accusing the companies of forming an illegal trust in restraint of trade. If the judge’s comments are any indication of how it will turn out, it does not look good for the large companies. He remarked that as a former antitrust prosecutor he never saw any evidence as good as the Visa CEO who said that all the major companies got in a room to talk about the new technology.

Basics of Antitrust Laws

The Sherman Antitrust Act is a child of the economic turmoil and social revolutions of the late 19th and early 20th centuries. It was passed in a climate of businesses constantly gobbling each other up, and working together to form the great “trusts” that eliminated competition in the marketplace that is the hallmark of capitalism and protection for consumers. But one misconception of the act is that it makes monopoly illegal, but that is not true. As long as a company gets there legally, then it can remain without consequence.

Since the act was passed in the early 20th century it has gone through several changes and tune-ups. Now the primary provision of the law seeks to give each business the opportunity to compete in the marketplace on the basis of price, quality, and service. The reasons behind this policy choice are aimed at benefiting 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.

These antitrust laws are some of the most powerful in the federal code, and can implicate both the criminal and civil sides of the law. As a result, it is imperative that small and large business alike understand how the antitrust laws implicate them. This is true because these laws can be used both as a shield and sword in business.

As you consider what the antitrust laws mean for you business, contact us at The Royse Law Firm. We are here to help your continue to grow, and provide you with the kind of legal advice and counsel that is invaluable to any business. We look forward to hearing from you today.

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Roger Royse
rroyse@rroyselaw.com

Roger Royse, the founder of the Royse Law Firm, works with companies ranging from newly formed tech startups to publicly traded multinationals in a variety of industries. Roger regularly advises on complex tax structuring, high stakes business negotiations and large international financial transactions. Practicing business and tax law since 1984, Roger’s background includes work with prominent San Francisco Bay area law firms, as well as Milbank, Tweed, Hadley and McCloy in New York City.
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