Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Cal.: Credit card companies dodge merchant ‘liability shift’ injunction, (Mar 17, 2016)

By Greg Hammond, J.D.

Two Florida grocery and liquor store operators were denied their request for preliminary injunction against major credit card companies Visa, MasterCard, American Express, and Discover, which would have stopped the credit card companies from implementing a “Liability Shift” for fraudulent credit card transactions. The motion was fatally defective, according to the federal district court in San Francisco, for failing to establish irreparable injury (B & R Supermarket, Inc. v. Visa, Inc., March 16, 2016, Alsup, W.).

The store operators, B & R Supermarket, Inc. and Grove Liquors, LLC, filed suit against the four credit card companies, alleging that American Express, Discover, Visa, MasterCard, and their issuing banks decided to shift the liability for card present chargebacks (dubbed the “Liability Shift”) from issuing banks to the merchants, unless the merchants could satisfy certain conditions. The cost of the transition to electronic chip or “EMV chip” cards is allegedly paid by merchants that accept the cards and must purchase new point-of-sale (POS) equipment at a cost of $100 to $600 per machine to process chip card transactions. After purchasing the new POS equipment and training staff, a merchant’s equipment must be “certified” by EMVCo, LLC as a condition of avoiding the liability shift, the complaint asserts.

The plaintiffs provided two declarations, made by a cashier and an executive assistant, in support of their motion for preliminary injunction. The cashier explained that because its new POS machines and EMV chip readers have not been certified, the store has asked customers to swipe their cards and provide identification, “leading some customers to take offense.” The executive assistant claimed that the number of charge-backs has increased from one to two per week to 10 to 15 per week, mostly due to EMB chip card transactions.

The court denied the motion, concluding that it is “fatally defective for failing to establish irreparable injury.” The sworn record, according to the court, merely demonstrated an “uptick in inconvenience, lost time, unhappy customers, and lost sales,” which can be compensated for with a damage award. Further, the record was “all the more inadequate as to other merchants across the nation,” since no class has been certified, no record has been submitted that would allow such certification, and counsel currently represent only B & R and Grover Liquors. “It would be most imprudent to halt the nationwide rollout of the EMV program (or any part of it) on so thin a record,” the court concluded.

The case is No. C 16-01150 WHA.

Attorneys: Alexandra Senya Bernay (Robbins Geller Rudman & Dowd LLP) for B & R Supermarket, Inc. and Grove Liquors, LLC. Robert John Vizas (Arnold & Porter LLP) for Visa, Inc. and Visa USA, Inc.

Companies: B & R Supermarket, Inc.; Grove Liquors, LLC; Visa, Inc.; Visa USA, Inc.; MasterCard International Inc.; American Express Co.; Discover Financial Services

Cases: Antitrust CaliforniaNews