Chip-Reader Lawsuit Proceeds Against Card Companies

It’s been a year since the EMV card reader deadline. Now, the big card companies — Visa, Mastercard, American Express and others — are all facing a class-action lawsuit brought by retailers over the new chip readers.

Florida-based B&R Supermarket Inc. and Grove Liquors LLC are suing on behalf of merchants nationwide, alleging that the credit card companies conspired to dump fraudulent transactions on merchants that didn’t make the EMV card deadline. The complaint was filed as a violation of the Sherman Antitrust Act.

A San Francisco-based federal judge permitted the suit to proceed, saying that the two merchants “plausibly allege an impermissible conspiracy” by the card companies to impose the penalty on merchants who had not implemented the card reader by the deadline of Oct. 1, 2015.

The complaint includes the example that some merchants have been allegedly responsible for more than $10,000 in fraudulent transactions and fees. The plaintiffs are seeking an unspecified amount of damages, on top of costs and attorneys fees.

“This is a pretty big whack for the small merchants,” the merchants’ attorney, Patrick J. Coughlin, told Law360. “It’s very punitive for them.”

According to Bloomberg, Mastercard representatives have expressed their disappointment with the status of the case but are hoping to put the issue behind them and build relationships with customers. American Express has declined to comment, and Visa has not responded.

Banks that were originally named as defendants were dismissed from the case, but time will tell if they are added back in, which is something U.S. District Judge William Alsup said is being considered.