Saturday , January 19, 2019

Shift4 Is Embroiled in an Antitrust Suit Alleging It Shuts out Rival Restaurant Processors

The ongoing consolidation of companies focused on point-of-sale systems for restaurants gave rise on Tuesday to an antitrust suit that seeks to reverse one of the most recent mergers among payment processors. Payment Logistics Ltd., a San Diego-based payments provider, alleges in its complaint that Shift4 Payments LLC is using its control of multiple POS systems and a major payments gateway to bar competing processors for mid-size and large restaurants.

The suit, filed in the U.S. District Court for the Southern District of California, also names as defendants Lighthouse Network LLC, the former name for Shift4’s parent company, and Shift4 Corp., a Las Vegas-based payments-gateway provider Lighthouse acquired in January and renamed Shift4 Payments, which Allentown, Pa.-based Lighthouse took as its new corporate name.

Payment Logistics, a 15-year-old independent sales organization, asks the court to dissolve the Lighthouse-Shift4 merger and award Payment Logistics triple damages for the harm it alleges it has sustained. “We find the claim filed by Payment Logistics to be completely baseless and we intend to vigorously defend our position,” says a Shift4 spokesman in an email message to Digital Transactions News.

The complaint centers on a trio of acquisitions Shift 4 has executed in the independent software vendor (ISV) market and ties these deals to the acquisition of Shift4 Corp. to allege that Payment Logistics has been shut out of competing for payment processing for restaurants using the Shift4 gateway. In 2017, Shift4 acquired Action Systems Inc., Restaurant Data Concepts Inc., and Future POS Inc. The POS systems from these ISVs increased Shift4’s market share in POS systems for mid-size and large restaurants to 35%, up from 3% before the deals, and “allowed [Shift4] to become the dominant player,” the suit contends.

Once Lighthouse acquired the Shift4 Corp. gateway, it was able to funnel transactions to the gateway and deny access to competing processors serving restaurants, according to Payment Logistics’ complaint, which refers to gateways as “payment interfaces.”

“The POS systems Lighthouse acquired relied on third-party payment interfaces to connect to the multitude of payment processors out there,” said Dustin Niglio, chief executive of Payment Logistics, in a statement. “These payment interfaces ensured the [approximately] 60,000 restaurants who use these POS systems were free to work with the payment processor of their choice. Competition among payment processors meant these restaurants could obtain competitive credit card processing rates with innovative and secure payment processing technology.”

But “the Shift4 acquisition serves to eliminate third-party payment interfaces and lock these restaurants into using Shift4’s payment interface and merchant-account service,” Niglio said.

As for the companies that control the remaining 65% of the POS-system market for mid-size and large restaurants, these include “few firms that allow for independent payment-interface integration,” Payment Logistics argues in its complaint.

“We hope that this lawsuit will restore competition and protect innovation to the benefit of restaurant customers, thousands of independent restaurants, payment processors, and system resellers,” Niglio’s statement said.

The suit’s case number is 18CVO786 L. The plaintiff is represented by MoginRubin LLP, with offices in San Diego and Washington, D.C.

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