Thursday, January 4, 2024
The complaint alleges that Visa's actions to stamp out surcharging and cash discounting are anticompetitive and have allowed the card giant to gain "monopoly power."
"The surcharge/discount rules are unclear on purpose to allow only Visa and the issuers to benefit and squeeze out any margin for the ISOs," said James Huber, a managing partner at Global Legal Law Firm and the lead attorney representing MiCamp.
Over the past several years, ISOs and sales reps have been actively promoting alternative pricing arrangements (sometimes collectively referred to as dual pricing) that pass along processing costs to customers who pay for purchases using cards.
Forty-eight of the 50 states expressly permit credit card surcharging. Dual pricing, which refers to merchants offering customers a lower price for using certain methods of payments (like cash), got its legal footing from the Durbin Amendment to the 2010 Dodd-Frank Act.
Cash discounting and surcharging have not set well with Visa. In July 2023, Visa lowered the cap on permissible credit card surcharging from 4 percent to 3 percent (which is lower than permissible surcharges in some states and can be lower than the all-in cost of processing, the lawsuit noted).
Visa also went after dual-pricing merchants, dispatching secret shoppers to identify those that don't abide by Visa rules, which, for example, set forth the way prices should be displayed and levy fines on those that don't comply. The lawsuit likens these fines to "criminal penalties."
"Visa's use of paid employees, or as Visa has coined them, 'secret shoppers,' to audit merchants and enforce its surcharge rules is akin to utilizing privately paid police officers to effectuate its goal of continuing to assess quasi-criminal penalties on ISOs," the lawsuit maintains. It further asserts that "by making cash discount programs confusing and fining ISOs for non-compliance, Visa effectively stopped ISOs from showing consumers how much Visa charged," and took a huge bite out of ISOs margins.
"While the ISO has the option to pass the penalties that Visa assesses onto the merchant, it would likely put many merchants out of business to pay a huge fine. Thus, the ISOs bear the cost of the fees or other penalties that Visa assesses on its merchant," the complaint states.
The "ambiguity in [Visa] rules" and the risk of fines has led many ISOs to pull back on or to stop offering programs like surcharging and cash discounting," the complaint alleges, adding that this "has cost MiCamp and other similarly situated ISOs hundreds of millions in profits."
A Dec. 27, 2023, press release about the lawsuit recounted the story of a MiCamp merchant client in Arizona that tried to recoup card fees to fund after-school programs for underprivileged children. Visa claimed the merchant failed to comply with its rules for dual pricing and fined MiCamp $70,000 for the infraction.
When MicCamp appealed the fine, Visa allegedly initiated secret shopper visits to more than 1,800 MiCamp merchants, "which MiCamp believes was an act of retaliation," the press release stated, adding that details identifying those merchants were then published online, leading to the extraction of data and private information from MiCamp's merchants.
"This data allegedly fell into the hands of competitors who attempted to blackmail MiCamp Solutions into paying $5 per merchant to prevent it from being sold to other competitors – an offer MiCamp claims it did not accept," the press release further stated.
Not long after, MiCamp sent a formal legal demand letter seeking comprehensive information regarding Visa's definitions and policies regarding non-compliance. But that request went unheeded.
"MiCamp's lawsuit marks a significant turning point in the ongoing narrative of the payment industry, potentially carrying far-reaching implications for ISOs, merchants and consumers," the press release asserted.
In its court filing on behalf of the class, MiCamp asked that damages awarded at trial be trebled in accordance with antitrust law, plus interest. 
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