In 2003, Paycom sued Mastercard, accusing the company of violating antitrust law by levying penalties for chargebacks against merchants who accept credit card charges in transactions where the physical card is not present.
The original suit also claimed that Mastercard violated antitrust law by conspiring with member banks to pass on fees to payment processing companies such as Paycom. A third component of the suit alleged that Mastercard created rules limiting the participation of foreign banks in Mastercard’s payment business.
In 2005, U.S. District Judge David Trager dismissed the case against Mastercard, saying that the credit card company’s practices did not violate antitrust laws.
The 2nd Circuit Court of Appeals upheld Trager’s decision, ruling that Paycom lacked standing to pursue an antitrust claim against Mastercard and failed to sufficiently allege “concerted action” on the part of member banks.
While the court conceded that Paycom could have shown antitrust injury as a result of Mastercard’s alleged violations, it said the payment processor was not the best enforcer of the antitrust claims.
Paycom Communications Director Rand Pate told XBIZ the company will not pursue further legal action.
“We are pleased that the case has finished,” Pate said. “The lawsuit was brought by prior management that is no longer with the company, and we have no desire to be embroiled in litigation with a card association. We had already begun talks with Mastercard to dismiss the appeal when the court announced its decision, and had communicated to Mastercard that if we won the appeal we would not pursue the case further.”
Pate added that the payment processor is committed to working with Mastercard and other credit card companies in the future.
To read the opinion, click here.