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Monday, April 30, 2018

Anti-trust suit alleges merchant services monopoly

A California-based ISO is challenging a recent acquisition by an East Coast rival that it asserts upends the competitive landscape for providing payment interface and other merchant account services to midsize and larger table service restaurants.

Payment Logistics Ltd, headquartered in San Diego, filed a lawsuit in federal court in San Diego last week alleging that Shift4 Payments LLC is “usurping control” of the market for mid-to-large table service restaurants.

Payment Logistics wants the court to undue the January acquisition of Shift4 Corporation that led to the creation of Shift 4 Payments, asserting the deal has allowed Shift4 to monopolize payment interface and merchant account services for the mid-to-large table service restaurant market.

The lawsuit, Payment Logistics Limited v Lighthouse Network, LLC, Shift4 Corporation and Shift 4 Payments LLC, is a civil action filed in U.S. District Court for the Southern District of California. It alleges that a string of recent acquisitions that created Shift4 violates two key federal anti-trust laws: the Clayton Act and the Sherman Act. The Sherman Act outlaws contracts, combinations and conspiracies that restrain interstate and foreign trade. The Clayton Act prohibits mergers or acquisitions that could lessen competition. Both are enforced by the U.S. Department of Justice and the Federal Trade Commission.

Targeted acquisitions

Here’s some background. Beginning in early 2017, the ISO originally known as United Bank Card and later Harbortouch Payments, changed its corporate moniker to Lighthouse Network and embarked on a series of acquisitions of value-added resellers and independent software vendors (ISVs) specializing in restaurants. Among the ISVs it acquired was Action Systems Inc., which had been offering restaurants a payment interface developed by Payment Logistics.

In January 2018, Lighthouse purchased Shift4 Corp., a payment gateway company with a large book of business in the hospitality sector, including Choice Hotels and Ceasars Entertainment. Immediately following the acquisition, Lighthouse changed its name to Shift4 Payments.

In its lawsuit, Payment Logistics alleges that Shift4 “has become an avaricious acquirer” and that the January acquisition of Shift4 Corporation was a “tipping point” in its quest to control payment processing for medium and large table restaurants. It further asserts that Shift4 is now strong-arming merchants that use its hardware and software systems to also use its payment interface or pay higher fees. The suit alleges Shift4 also has been offering monetary incentives to POS dealers that switch merchants to the Shift4 network. “The scheme is working,” Payment Logistics asserted, noting that its sales of payment interfaces to medium and large table restaurants “have become stagnant and will decline in the immediate future” as merchants jump ship for Shift4.

“Before the Shift4 Corp acquisition, Lighthouse did not have a proprietary Payment Interface and could only direct accounts to their preferred provider; they could not completely cut out competitors. The Shift4 Corp. acquisition, however, gave them control of the Shift4 Corp. Interface, thereby creating a structural change in the market,” the lawsuit alleges. That structural change, in turn, allows Shift4 to “monopolize the relevant markets at the expense of horizontal competition at the payment processor level,” the lawsuit states.

Prior to its acquisition, Shift4 Corp. laid claim to less than 10 percent of the market for payment interfaces for medium and large table restaurants, according to the lawsuit. If Shift4 succeeds in its efforts to eliminate independent interfaces, that market share could grow to at least 40 percent, Payment Logistics stated.

Payment Logistics wants the court to declare that Lighthouse’s acquisition of Shift4 violates the Clayton Act and the anti-monopoly provisions of the Sherman Act, and to enjoin the Shift4 acquisition or any other agreement that would allow the two companies to combine.

“Payment Logistics wants to re-establish a level competitive playing field,” said Payments Logistics CEO Dustin Niglio. “We hope this lawsuit will restore competition and protect innovation to the benefit of restaurant customers, thousands of independent restaurants, payment processors and system resellers.” end of article

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