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Mercury Payment Systems, LLC Brought to Federal Court by Heartland Payment Systems

Heartland Payment Systems (NYSE: HPY) filed a lawsuit against Mercury Payment Systems accusing them of deceptive pricing practices with the aim of securing new retail customers and maintaining existing merchants. The deceptive practices also include false advertising, intentional interference with contractual relations and prospective economic advantage, and unfair payments. The lawsuit, filed in the United States District Court in the Northern District of California, seeks to hold Mercury responsible for its deceptive trade practices and recompensing the full value of each merchant and prospect Mercury took from Heartland through deceptive practices.

Businesses such as Heartland and Mercury provide processing services for electronic payments—linking businesses and card-issuing banks. However, the difference is that Heartland is accusing Mercury of increasing its markup by re-categorizing them as interchange fees. These inflated rates are charged without the customer being aware.

This can manifest itself in the example of a restaurant chain comparing prices for electronic payment processing providers. Heartland may charge a merchant seven cents per transaction while Mercury undercuts that with six and a half cents per purchase. As a result, the business will switch to Mercury. Yet the existing discrepancies indicate that Mercury inflates the fee by as much as four cents costing Heartland a customer and the merchant a significant amount of money over time.

This creates an unbalanced playing field for the two credit card payment processors all at the expense of the common merchant. The lawsuit is sending waves around the merchant services providers sector as the outcome of this lawsuit may impact future business practices for all concerned parties in this industry.

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