Backpage.com Sues Cook County Sheriff in Payment Card Acceptance Dispute

The owner of online classified-advertising portal Backpage.com is suing the sheriff of Cook County, Ill., in federal court for pressuring payment card networks to ban card purchases in Backpage’s adult section.

The lawsuit filed Tuesday by Backpage.Com LLC in U.S. District Court in Chicago alleges Sheriff Thomas J. Dart engaged in censorship and violated due process of law by going to Visa Inc. and MasterCard Inc. in an attempt to prevent the site from accepting card payments. The suit seeks unspecified monetary and punitive damages and a declaration that Dart’s actions were unconstitutional under the First and Fourteenth amendments. It also seeks restraining orders and a permanent injunction that would ban Dart “from taking any actions to coerce, threaten, or intimate repercussions directly or indirectly to credit card associations, other financial institutions, or other parties concerning Backpage.com,” the civil complaint says.

Dart, whose county is the nation’s second largest and includes Chicago, has frequently targeted prostitution and sex trafficking in suburban areas. He earlier sued the big classified-ad Web site Craigslist for allegedly facilitating prostitution.

“It is regrettable that Backpage has dedicated so many resources to lawyers and lobbyists when they could be partnering with law enforcement to seek justice for sex-trafficking victims,” the Sheriff’s Office said in an emailed statement to Digital Transactions News. “For years, Sheriff Dart has laid out to Backpage the numerous instances where pimps and traffickers have used their site for criminal purposes, and attempted to negotiate in good faith with Backpage’s management to find common ground and put traffickers behind bars.

“Unfortunately, this outreach was met with little more than delaying tactics and empty promises,” the statement continues. “Sheriff Dart requested that the credit card companies voluntarily do what Backpage will not—disassociate their business from online sex trafficking in the name of good corporate citizenship.”

Backpage, however, said in the suit that “it sought to work with Sheriff Dart’s office on screening and security measures … but Backpage.com refused to capitulate to the sheriff’s demands for censorship.”

Events leading to the lawsuit began in late June when Dart sent letters to Visa and MasterCard asking that they ban Backpage transactions from their networks, requests the companies granted. Those letters came nearly five years after Dart first voiced concerns about Backpage’s adult section, which was shortly after Craigslist shut down its adult site under pressure from a group of state attorneys general, according to the suit.

Backpage has portals for numerous cities. In the United States, users were not charged for placing ads in most categories, but until July 6, according to the suit, the site charged $5 to $17 for posts in the adult category and $1 for dating ads.

The company said it “prohibits illegal content and activity on its Web site and takes extensive steps to prevent such misuse, especially to guard against any form of human trafficking or child exploitation.” Such steps include requiring affirmation by the ad placer of being at least age 18 and agreeing to the company’s posting rules, and using automated filtering technology to spot suspicious activity. The lawsuit says Backpage reports about 300 suspect ads per month to the National Center for Missing and Exploited Children.

Backpage says courts have protected adult ads on First Amendment grounds numerous times, and the suit notes that a court dismissed Dart’s 2009 lawsuit against Craigslist. Dart is now trying a new tactic: attempting to cut off Backpage’s access to credit card payments, the suit says. His “cease-and-desist” letters to Visa and MasterCard used language that amounted to coercion, according to the suit. Backpage wants the court to order that Dart retract those letters.

The suit says Backpage ceased charging for adult ads on July 6, after the Visa-MasterCard bans for “any and all” purchases on the site took effect. The suit does not say who Backpage’s merchant acquirer is, or how much the company is losing in revenue. The company says its only means of payment now is Bitcoin, which accounts for only a “small percentage” of payments.  A spokesperson for a Chicago attorney representing Backpage did not return a Digital Transactions News call by late Tuesday.

“Providing services for free can only be a temporary measure, however,” the suit says. “All publishers need revenues to survive, and the First Amendment precludes coercive government actions to choke off revenues to silence speech it disfavors.”

At the request of Dart, American Express Co. in late April banned use of its cards for purchases on Backpage’s adult section, according to the suit.

Citing information from Dart’s office, USA Today reported that in April, Backpage published more than 1.4 million adult-services ads in the U.S., and the company brought in roughly $9 million in revenue per month through that channel. The newspaper also said Backpage accounted for about 70% of prostitution advertising among five Web sites that carry such ads in the U.S. earning more than $22 million annually from prostitution ads, according to a 2012 estimate by AIM Group, a media research and consulting company.