Three small businesses have initiated legal action against major credit card processors, alleging anticompetitive practices that force merchants to pay excessive transaction fees. The lawsuit, filed Tuesday in Manhattan federal court, targets the companies’ interchange fee structure, which the plaintiffs claim represents illegal price-fixing behavior.
The lead plaintiff, Falafel Taco, operates a restaurant in Pleasantville, New York, specializing in fusion cuisine that combines traditional Kosher Jewish dishes with Mexican-inspired offerings. The establishment, known for menu items such as black bean falafel tacos and matzo ball tortilla soup, has joined forces with Quaker Hill Tavern in Chappaqua, New York, and Carmine Minardi NYC, a Manhattan hair salon located on the Upper East Side.
According to the complaint, the defendants have subjected businesses to substantial and continuing overcharges through their interchange fee system. These fees, paid by merchants to banks for card issuance and transaction processing, allegedly result from horizontal agreements among competitors to fix prices. The plaintiffs argue that inflated fees increase merchants’ operational costs, forcing them to raise retail prices, reduce services, or accept diminished profit margins.
The businesses claim the credit card processors have generated more than $700 billion in fees since January 24, 2019, maintaining the same anticompetitive network practices that were previously challenged in earlier litigation. The lawsuit seeks compensatory damages for alleged violations of the Sherman Act and challenges the validity of a future release provision from a 2019 settlement that would bar similar claims through August 8, 2028.
Represented by attorney Jason Bressler of Bressler LLP, the plaintiffs argue that the future release provision violates Federal Rule of Civil Procedure 23, claiming it resulted in inadequate representation and inequitable treatment of absent class members. They also contend it violates the identical factual predicate doctrine by waiving unasserted future claims held by some class members to benefit the class as a whole.
The lawsuit emerges against a backdrop of ongoing legal challenges to credit card processing fees. In March 2024, the defendants announced a major settlement with U.S. merchants, agreeing to cap credit interchange fees until 2030 and negotiate fees with merchant-buying groups. However, U.S. District Judge Margo Brodie in the Eastern District rejected the proposed settlement. A partial settlement conference in that case is scheduled for April 27.
The Department of Justice filed a separate lawsuit in 2024 focusing on debit card market dominance, alleging that one company controls more than 60% of debit transactions in the United States, generating over $7 billion in annual processing fees. According to then-Attorney General Merrick B. Garland, merchants and banks pass these costs to consumers through higher prices or reduced service quality.
Swipe fees, calculated as a fixed fee plus a percentage of sales totals, typically range from 1% to 3% of transaction amounts. These fees are paid to credit card companies in exchange for enabling transactions, with merchants ultimately passing the costs to consumers. In response to rising fees, many small businesses have begun posting notices informing customers of additional charges for non-cash payments.
The plaintiffs estimate the potential class could number in the millions of members due to the widespread nature of credit card acceptance in commerce. The case highlights ongoing tensions between merchants and payment processors over transaction costs that affect businesses across various industries.
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