HD Home Depot Inc

By Robin Sidel 

Home Depot Inc. filed an antitrust lawsuit against Visa Inc. and MasterCard Inc. reigniting claims from a decade ago that merchants pay too much for debit- and credit-card transactions and adding new contentions about the effectiveness of chip-based cards to reduce fraud.

The lawsuit comes several years after Home Depot and hundreds of other retailers opted out of a settlement, then valued at $7.25 billion, in a price-fixing case that addressed many of the same issues.

This time, the do-it-yourself retailer also contends that Visa and MasterCard colluded to prevent the adoption of new chip-based cards that require consumers to enter a personal identification number, or PIN, to authorize a transaction. "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," Home Depot said in the lawsuit filed Monday in U.S. District Court for the northern district of Georgia.

The new chip cards being rolled out in the U.S. are embedded with a computer chip. This creates a unique code for each transaction, reducing the chance that criminals can create counterfeit cards if they hack into a retailer's payment system.

The chip cards have long been used around the world, where they often require a PIN instead of a signature.

U.S. bank executives have said that they don't want to burden Americans with a PIN when they are using their credit cards at the check-out line. The banks collect higher merchant fees for signature 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, and their member banks and it provides a greater threat to their market dominance," the lawsuit claimed.

The legal action also contends that Visa and MasterCard, which set the so-called interchange fees collected by banks, are engaged in price-fixing that prevent competition for merchant acceptance. "We had hoped to resolve our claims outside of litigation but those efforts proved to be unsuccessful," Home Depot spokesman Stephen Holmes said.

Visa said it is aware of the lawsuit. It is seeking to transfer the case to a federal court in Brooklyn that is handling other "opt-out" cases filed by merchants including Target Corp. and 7-Eleven Inc. Wal-Mart Stores Inc. also opted out of the 2012 merchant settlement, but later settled separately.

MasterCard said the lawsuit wasn't a surprise given Home Depot opted out of the 2012 settlement. It also said it leaves the decision on how to verify cardholder identity, via PIN or signature, to the merchant and card-issuing financial institution. "Regardless of how the cardholder's identity is confirmed, the chip makes data much more secure, rendering it almost useless to create fraudulent cards or transactions," MasterCard said,

The Home Depot lawsuit comes a month after Wal-Mart sued Visa for the right to choose how customers authorize debit-card purchases. The retailer wants customers to use a PIN, but Visa requires that shoppers can have the choice between a PIN and a signature.

--Paul Ziobro contributed to this article.

Write to Robin Sidel at robin.sidel@wsj.com

(END) Dow Jones Newswires

June 15, 2016 16:47 ET (20:47 GMT)

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