Judge Allows Chip Reader Lawsuit Against Major Credit Card Companies To Move Forward

Major Credit Card Companies

The case could actually become a big dollar, major class action suit.

The lawsuit centers on the nationwide upgrade of using chip-based credit cards over swipe readers, which has slowly and awkwardly been rolling out – a major headache for consumers and stores. Many customers find the process confusing, and the transaction process is slower than the magnetic stripe cards.

Business owners haven’t seen any real benefit from it, being forced to upgrade to the costly machines that don’t entirely eliminate fraud. And, if they refuse to upgrade, they are hit with a penalty from the credit card companies.

Stores not using the chip readers will be on the hook if a shopper has their credit information stolen – something banks used to deal with. The terms were laid out by banks, credit card companies and big-name retailers.

Four grocery stores in New York, California and Florida filed the lawsuit, claiming it’s an industry conspiracy that is in direct violation of the fair trade practices. Their suit is against American Express, MasterCard, Visa and Discover.

The grocery stores have still not been permitted class action status. And, if they do, the case could involve roughly eight million small businesses through the U.S.

The lawsuit is asking for $6 billion – to recoup the losses they incurred from the chip system upgrade.

The owners of the grocery store said Visa CEO Charlie Scharf informed analysts he got together “in a room” with other credit card companies, banks, trade groups and a few retailers to develop a plan.

This was something that surprised even William Alsup, a former antitrust prosecutor and U.S District judge. It’s not every day in an antitrust case you hear a CEO admit they were in a room when things go down.

The judge permitted the case to move forward because it raises a reasonable suggestion of collusion, noting the credit card industry may have worked “in lockstep.” The grocery store owners feel the industry is attempting to eliminate the free market competition by coming together to impose uniform penalties. They said if they had not done this, a single credit card company could provide better terms.

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