The Walmart antitrust case against Visa and MasterCard

Unethical Business Research Practices

What unethical research behavior was involved?

The antitrust case brought by Wal-Mart and other retailers against Visa and MasterCard in the U.S. Eastern District court, was settled in 2003 for $3 billion and primarily involved a dispute concerning the efficient pricing of access to payment information, including security data that confirmed or refuted the transactional identities of cardholders (Roberds & Schreft, 2009). In their pleadings, Wal-Mart and other class action litigants argued that third-party providers such as Visa and MasterCard required them to accept both debit and credit cards issued by MasterCard but the interchange fees were higher for debit cards (Ulzheimer, 2012). In sum, the suit filed by Wal-Mart and other large retailers claimed that Visa and MasterCard "required all merchants who accept their credit cards to also accept their signature debit cards [which] constitutes an illegal tie-in in violation of antitrust law" (Peterson, 2002, p. 31). In their responsive pleadings, the defendants maintained that the plaintiffs' argument failed to satisfy the definition of tying because their so-called "honor-all-cards agreement" with merchants did not preclude them from "steering their customers toward PIN-based debit transactions with their concomitant lower merchant fees" (Peterson, 2002, p. 32). In reality, though, the case focused on the fundamental right of the class action litigants to timely and accurate research information as discussed further below.

How has the unethical behavior affected the organization, the individual, and society?

Across the board, the Internet has profoundly affected the manner in which companies operate and consumers go about making their purchase decisions (Olatokun & Bankole, 2001). Since these are global trends, the outcome of the Wal-Mart class action suit has world-wide implications for retailers in defining what constitutes ethical practices. With respect to the outcome for the litigants, according to Ulzheimer, "The retailers won the suit and were paid $3 billion by MasterCard and the issuing banks in damages and had to change some business practices costing another $25 billion" (2012, para. 3).

The practices that were used by Visa and MasterCard that formed the focus of the lawsuit in question fall under the category of normative business ethics, in other words, how companies should behave and what governance mechanisms should be in place to ensure such ethical behaviors (Azola, 2011). In this case, the aggregation of enormous amounts of personal identifying data (PID), including some aspects of individual identities such as name, birth date, Social Security number, and unique personal identifying data) has allowed third-party providers such as Visa and MasterCard to charge a fee for verifying transactional data used in market research.

Because these types of third-party services have emerged only relatively recently, there remains a lack of formal standards and transparency for pricing structures that may provide these third-party providers with an unfair advantage. For example, Roberds and Schreft (2009) report that, "These [third-party providers] attempt to meet the demand for transactional identities that exists in the market economy. Just as with other digital goods, such as computer software and recorded video, it is hard to know whether these data are being efficiently collected and priced" (p. 23). When third-party providers have been found to "cross the ethical line" in their pricing structures, they have been successfully brought to trial and heavily penalized for their unethical practices. In this regard, Roberds and Schreft emphasize that, "For example, one could interpret the famous antitrust case brought by Wal-Mart and other retailers against Visa and MasterCard, settled in 2003 for $3 billion, as a dispute over the efficient pricing of access to payment information, including the validity of cardholders' transactional identities" (emphasis added) (2009, p. 23).

How could the unethical behavior be avoided or resolved?

Although there remains a need for a codified set of ethical behaviors for third-party providers, there are some current Web standards available that can be used to help avoid such unethical practices in the future. For example, ISO27001 provides the basis for third-party audits and implements OECD principles concerning adequate security measures for online information and network systems (Binning, 2009). According to the International Standards Organizations (ISO), "The objective of the standard itself is to provide a model for establishing, implementing, operating, monitoring, reviewing, maintaining, and improving an Information Security Management System" (An introduction to ISO 27001, 2012, para. 2). In addition, the SAS70 auditing standard can also be applied to these third-party providers to help ensure ethical business practices (Binning, 2009). Despite the availability of these guidelines, it is reasonable to conclude that as innovations in technology continue to redefine how business is conducted online, there will be companies lining up to exploit these innovations to their advantage in ways that may be unethical but not illegal -- yet.