Heartland Payment Systems filed a lawsuit against Mercury Payment Systems on Thursday, alleging the company is illegally competing against Heartland with false advertising and other deceptive trade practices.
According to the suit filed in the U.S. District Court in the Northern District of California, Mercury is allegedly misleading merchant customers by hiding excess profits in interchange fees charged by credit card networks and issuing banks—a violation of the Lanham Act and other state laws.
Heartland is seeking to halt Mercury’s alleged deceptive pricing practices and to recover full value for each merchant and potential customer Mercury has taken from the company by falsifying interchange costs.
“Heartland has consistently advocated for fair, transparent and ethical credit, debit and prepaid card processing and billing procedures for small and mid-size businesses,” Heartland Chairman and CEO Robert Carr said. “The deceptive pricing practice of falsely inflating pass-through interchange fees not only constitutes unfair and illegal competition, it also costs even the smallest of merchants hundreds, or sometimes even thousands of their hard-earned dollars each year without their awareness. Industry-wide, the cost of deceptive interchange practices runs into tens of millions of dollars, and has caused great harm to the reputation of the entire electronic payments industry.”
E-payment services firms like Heartland and Mercury link businesses and card-issuing banks to allow for rapid approval or rejection of a payment after a card is swiped.
Heartland said Mercury and other payment services companies have circumvented interchange transparency by allegedly building markups into interchange fees. The complaint also alleged Mercury makes it difficult for merchants to change providers and that the company falsely informs merchants that Mercury is the only processor that supports their card-swiping equipment.
“Aside from putting a stop to Mercury’s deceptive, illegal practices, our ultimate objective with this lawsuit is to help ensure a level competitive playing field in the electronic payment processing industry to provide fair, honest services to merchants, regardless of their size or financial sophistication,” Carr said. “We believe that when all the facts concerning Mercury’s misleading, unlawful practices come to light in open court, we will start to put an end to falsely inflated interchange billing and other deceptive practices that harm our customers as well as the payment processing industry.”