Friday, October 26, 2012
Payment intervention is defined as the use of the payment mechanism to detect or prevent certain transactions that are deemed to be politically incorrect or against a particular jurisdiction's law. The latest target is online pharmaceuticals and their affiliates providing medications such as generic or unlicensed Viagra, Nexium, or Lipitor, all of which are illegal for Americans to have mailed into the United States.
In the recent paper "Priceless: The Role of Payments in Abuse-advertised Goods" presented at the 19th annual ACM Computer and Communications Security Conference in Raleigh, North Carolina, five academic researchers outline the methodology behind the aggressive practice known as payment intervention and arrogantly conclude that it is in society's interest.
This is the ugly face of monetary repression. It is shameful! Using the payments system as a repressive tool for or against certain behavior is like using Catholic Church attendance as a way to target illegal immigrants. In a free society, private payments should be covered by merchant-customer privilege just as attorney-client privilege covers confidential legal communication. Like the telephone network used to execute a transaction, the payments network is a neutral actor. Pro-choice means placing the decision of payment type in the hands of the money owner. Grandma wants her affordable generic Lipitor.
Oddly coupling the pharmaceutical sector with the counterfeit software sector in a dual study, researchers acknowledge the fragility of payments and show how an eradication effort can lead to the pursuit of riskier alternative payment methods:
"Overall, we find that reliable merchant banking is a scarce and critical resource that, when targeted carefully, is highly fragile to disruption. As a testament to this finding, we document the decimation of online credit-card financed counterfeit software sales due to a focused eradication effort. We further document how less carefully executed interventions, in the pharmaceutical sector, can also have serious (although less dramatic) impacts, including program closures, pursuit of riskier payment mechanisms, and reduced order conversions. Finally, we document the set of countermeasures being employed now by surviving merchants and discuss the resulting operational requirements for using payment intervention as an effective tool."Herein lies the problem with the current payments network. It is far too dominated by Visa and Mastercard whose contracts with acquiring banks stipulate that merchants are prohibited from selling goods that are illegal in the purchaser's destination country. Therefore, simply participating in those payment networks inextricably links the law to a voluntary transaction between two consenting parties providing an enforcement mechanism that wouldn't necessarily exist under other payment types.
Access to safe and affordable pharmaceuticals should be a natural right for all Americans and denying it would be unacceptable, unethical, and a threat to the public health. A strong case can be made that uninsured, low-income patients obtaining affordable medications is a morally legitimate activity. "Does legality establish morality?" asks economist Walter E. Williams, who answers, "Legality alone cannot be the talisman of moral people."
In June 2011, Visa (and Mastercard similarly) made a series of changes to their operating regulations and explicitly classified pharmaceutical-related merchant category codes as "high-risk" along with gambling and various kinds of direct marketing services. Kudos must be given to the State Bank of Mauritius for being the only bank that both correctly codes pharmaceutical transactions and supports a large number of affiliate programs.
Leaving aside for the moment the twisted economics of privileged drug manufacturers collaborating with generic manufacturers, the immorality of the patent system, and the case against intellectual property, supranational authority was bestowed upon the IACC (International AntiCounterfeiting Coalition) in 2010 through a series of agreements made between brand holders, payment providers, and the White House’s Intellectual Property Enforcement Coordinator. The agreements streamlined targeted actions against 'rogue' websites and merchant accounts used to monetize counterfeit goods and services.
Bragging about the simplicity and effectiveness of the initiative, the study's researchers reveled in determining who was 'rogue' and then preparing them for 'termination':
"Security interventions should ultimately be evaluated on both their impact in disrupting the adversary and their cost to the defender. On both counts, the payment tier of abuse-advertising appears to be a ripe target. For the few tens of dollars for a modest online purchase, our data shows that it is possible to identify a portion of the underlying payment infrastructure and, within weeks, cause it to be terminated."Unfortunately, the practice of targeting the payments mechanism is on the rise by governments and sufficiently "chilled" payment network lackeys, but it will backfire in spectacular fashion. Consumers will be driven to more liberated alternatives such as the privacy-oriented and cash-like bitcoin. They certainly don't want VISA, Mastercard, PayPal and the rest of the gang telling them what is and is not an acceptable purchase. Interestingly, the study cited bitcoin among creative alternatives when Visa processing becomes abruptly disabled:
"A few US-based pharmaceutical programs, notably Health Solutions Network (which we did not study in our analysis), enabled Cash-On-Delivery (COD) payments for their customers when their Visa processing was disabled. Ultimately, the effectiveness of such mechanisms depends on their familiarity and overhead to consumers, the readiness of alternative sites offering more traditional payments, and the extent to which consumers are well motivated. Indeed, while we witnessed some programs (notably in the OEM software space) attempt to continue their businesses using alternative payment mechanisms including PayPal and, most recently, Bitcoin, by all accounts this has not been successful."I expect that to change radically for Bitcoin as the features of decentralized cryptographic money become more widely appreciated. Used properly, bitcoin can have the privacy attributes of paper cash and bitcoin doesn't make morality judgements about what you choose to do with your money. It is a natural fit for the online pharmaceutical industry. Payment providers, especially mobile payment providers, claim to represent the best in consumer-centric solutions, but if they truly care about consumers, why do they block so many important transaction types that consumers want?
Somebody has to say it. Big Pharma is a racket and Americans are being duped by the government and the powerful drug manufacturers that push their overpriced medications while simultaneously hiding behind the veil of protecting patient safety, for your own good of course. But "the little blue pill" will be protected as Pfizer's expiration date for the Viagra patent has just been extended until April 2020 which means no legal "generic Viagra" in the U.S. for several more years.
Perhaps more broadly disturbing is that the five individuals authoring the study seem to tacitly recommend the 'payments network' as the delegated enforcement arm of the justice system and sanctioned brand holders. These complicit payment providers do not practice payment neutrality nor do they recognize the importance of remaining nonpolitical and challenging encroachments that lead to politicalization.
The reason that it has become possible to utilize the payments apparatus in this manner is because society has become too complacent on insisting that our money not be used for identity tracking. The general attitude towards the privacy of cash (both physical and digital) has been eerily nonchalant and too readily conceded. Until that changes, expect evermore diminishing privacy in your transactions.
For further reading:
"Forbes on Viagra, Bitcoin and Intellectual Property", Stephan Kinsella, October 29, 2012
"Rogue Pharma, Fake AV Vendors Feel Credit Card Crunch", Brian Krebs, October 18, 2012
"Pharma vs India: a case of life or death for the world’s poor", Nick Harvey, October 17, 2012
"Fake pharmaceuticals: Bad medicine", The Economist, October 13, 2012
"What Payment Intermediaries Are Doing About Online Liability And Why It Matters", Mark MacCarthy, July 5, 2010