Store Owners File Lawsuit Against Credit Card Companies Over Chip Readers

chip reader, Naperville business law attorneyFor a number of years now, self-service credit card machines have allowed customers at retail establishments around the country to pay for their merchandise without ever handing the cashier their credit card. If you have used one recently, you may have been told to insert your card into a different slot than before—one that is designed to read the computer chip embedded in the card rather than the magnetic strip on the back.

As a business law attorney, I recognize the importance of keeping customer information safe and helping to prevent credit card fraud. However, an individual company’s responsibility for doing so can only be expected to go so far. Such is the basis for a number of lawsuits around the country that have been filed against the nation’s largest credit card companies.

Home Depot Among Litigants

This past March, four grocery stores—located in California, New York, and Florida—filed suit in federal court against Visa, MasterCard, American Express, and Discover alleging unfair trade practices. A separate but similar suit was filed by Atlanta-based Home Depot in June. These suits, which may eventually be granted class-action status, look, in part, to recoup the costs of upgrading to the new chip reader system, claiming that the credit card companies conspired against business owners in the development of the program.

Possible Collusion

The credit card companies set an October 1, 2015, deadline for retailers to have the new system. Those who did not comply were told that they—rather than the credit card companies—would be liable for any fraudulent transactions that occurred after the deadline, a liability typically assumed by the card issuer. The suits are fueled by comments made by Visa CEO Charlie Scharf in 2014, talking about how his company met “in a room” with other credit card issuers, trade groups, retailers, and financial institution to develop a plan for rolling out the chip reader technology. In doing so, the suits allege, the credit card companies eliminated the possibility of one company offering better terms, thereby limiting free-market competition.

Last week, in denying a motion to dismiss the suit brought by the grocery stores, a federal judge commented that “you don’t get many antitrust cases where the CEO admitted they were ‘in a room.’” The judge allowed the case to continue saying that the meeting “raises a plausible and reasonable suggestion of collusion.”

Contact an Attorney

If your company has been the victim of predatory practices by credit card companies, banks, or other entities, speak with an experienced Naperville business law attorney today. Contact the Gierach Law Firm for a confidential consultation and take the necessary steps in protecting your business.



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