Credit Card Networks Must Face Merchants’ Chip-Reader Suit

  • Retailers allege conspiracy to make them foot bill for frauds
  • Judge calls claims against Visa, MasterCard, AmEx plausible

Visa Inc., MasterCard Inc. and American Express Co. lost an early round of a lawsuit alleging they colluded to pin liability for fraudulent transactions on merchants who didn’t meet a chip-reading technology deadline.

A federal judge in San Francisco allowed the antitrust suit to proceed, saying in a ruling Friday that two Florida retailers “plausibly allege an impermissible conspiracy” by major credit card companies to impose the same penalty on merchants not using a certified chip card reader by Oct. 1, 2015.

The supermarket and liquor store that sued are seeking class-action status on behalf of merchants nationwide.

“We are disappointed that the court denied our motion,” Seth Eisen, a MasterCard spokesman, said in an e-mail. “As we move into the next phase of the process, we believe we have strong case that will allow us to put this matter behind us and focus on driving our business and relationships with our customers.”

American Express spokeswoman Marina Norville declined to comment on the ruling. Representatives of Visa and another defendant, Discover Financial Services, didn’t immediately respond to e-mail messages seeking comment after regular business hours.

Issuing banks named as defendants were dismissed from the case in Friday’s ruling, though U.S. District Judge William Alsup said they may be added back later if the retailers present more evidence.

After the lawsuit was filed in March, Visa, MasterCard and American Express offered to forgo chargebacks, the term for fraudulent transactions, of $25 or less, according to the ruling.

The case is B & R Supermarket Inc. v. Visa Inc., 3:16-cv-01150, U.S. District Court, Northern District of California (San Francisco).

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