As businesses and financial institutions grapple with data security in the wake of high profile breaches, tensions between retailers and the credit card industry over the creation and implementation of security standards appear to be growing. The disagreements between these two groups manifested themselves on June 2, when the National Retail Federation (“NRF”), the world’s largest retail trade association, announced that it sent a nineteen-page white paper to the Federal Trade Commission (“FTC”) encouraging it to investigate the Payment Card Industry Security Standards Council (“PCI”) for potential antitrust violations. PCI, an organization formed by major credit card companies in 2006, promulgates Data Security Standards (“DSS”) for merchants and service providers to follow for credit and debit card transactions. The NRF’s white paper attacks both the PCI DSS as well as the PCI and its standards more generally, arguing that PCI is acting collusively and that the PCI DSS should not be adopted as a government standard. The white paper comes after the FTC announced in March that it had issued orders to nine major companies requiring them to detail their compliance with the PCI DSS.
In its white paper, the NRF urged the FTC not to rely on the PCI DSS “for any purpose,” and “particularly not as an example of industry best practices.” The NRF argued that PCI was formed and is controlled by a single industry sector—major credit card companies—without input from retailers or other stakeholders, and that its motivations “conflict with the interests of businesses and consumers who use the payment card system.” NRF claimed that PCI’s actions in promulgating DSS that require retailers to invest in particular software and hardware (such as chip-and-PIN payment systems) amounts to anticompetitive conduct potentially in violation of antitrust law. The white paper argued that the PCI DSS, by requiring the adoption of specific proprietary technology, serves to “shift costs associated with data security—and notably, data breaches—onto merchants” while simultaneously benefiting payment card industry stakeholders. NRF also argued that the PCI DSS are not in fact more secure than cheaper alternatives (such as PIN-entry systems that do not require chip readers), and that PCI’s promotion of its standards constitute a “scheme” designed to benefit PCI members at the expense of retailers. In response to the NRF’s announcement, PCI issued a statement declaring that it “strongly disagreed with the unfounded assertions” in the NRF’s letter.
The NRF’s public announcement reflects the storm brewing between retailers and credit card companies over who should develop enhanced security standards and what those standards will be, as well as who will bear the cost of implementing those standards. The FTC’s potential adoption of the PCI DSS as a standard for determining the strength of companies’ data security practices would represent a significant step in establishing these standards as requirements, rather than non-binding suggestions, for all U.S. retailers. NRF’s strident statement that PCI is engaging in anticompetitive activity and acting contrary to the interests of retailers and consumers demonstrates that retailers do not intend to allow this development to occur without a fight.