Rules - Existing expenses not updated after applying merchant rule and no system message

[jponikarchuk]

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Version Number: v9.3.22-1
Reproducible in staging?: Yes
Reproducible in production?: N/A - new feature, doesn't exist in prod
If this was caught during regression testing, add the test name, ID and link from BrowserStack: #82438
Email or phone of affected tester (no customers): applausetester+piyomn@applause.expensifail.com
Issue reported by: Applause Internal Team
Bug source: Pull Request QA execution
Device used: iPhone 13 / iOS 18.7.1, Samsung Galaxy A52 / Android 14, Windows 11 / Chrome
App Component: Workspace Settings

Action Performed:

Preconditions: account has at least one workspace with rules in more feature enabled

Steps:

1. Create several unsubmitted expenses with merchant "Starbucks" (I created 3 expenses)
2. Navigate to workspace setting -> Rules -> Add merchant rule
3. Create the merchant rule with "Starbucks" as the merchant, configure description and any categories except "Meals and Entertainment" (I choose "materials" for categories)
4. Toggle on the "apply to existing unsubmitted expenses"
5. Click the "Preview matches" button to make sure there's unsubmitted expenses there and and save it
6. Navigate to the workspace chat
7. Click on the newly created report with several expenses
8. Click on any individual expense

Expected Result:

• in step 6, merchant should updated to "Materials", like the description that auto updated to "Jajan" after "Apply to existing unsubmitted expenses" is toggled on in Step 4
• in step 7, there should be a system message appeared on the update expenses since the description is updated.

Actual Result:

• in step 6, merchant doesn't updated to "Materials" like the description that auto updated to "Jajan" after "Apply to existing unsubmitted expenses" is toggled on in Step 4
• in step 7, the system message doesn't appeared on the update expense. there's only concierge system message from the original auto selected category before the merchant rule applied.

Workaround:

Unknown

Platforms:

• Android: App
• Android: mWeb Chrome
• iOS: App
• iOS: mWeb Safari
• iOS: mWeb Chrome
• Windows: Chrome
• MacOS: Chrome / Safari

Screenshots/Videos

1.mp4

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Issue Owner

Current Issue Owner: @luacmartins

[melvin-bot]

You have been assigned to this deploy blocker because you recently merged this PR: #82438

[melvin-bot]

💬 A slack conversation has been started in #expensify-open-source

[melvin-bot]

Triggered auto assignment to @brianlee-expensify (Bug), see https://stackoverflow.com/c/expensify/questions/14418 for more details. Please add this bug to a GH project, as outlined in the SO.

[github-actions]

👋 Friendly reminder that deploy blockers are time-sensitive ⏱ issues! Check out the open `StagingDeployCash` deploy checklist to see the list of PRs included in this release, then work quickly to do one of the following:

1. Identify the pull request that introduced this issue and revert it.
2. Find someone who can quickly fix the issue.
3. Fix the issue yourself.

[OSBotify]

🔍 Investigation Summary

Classification: Frontend bug
Causing PR: #82438 - "Enable merchant rules v2" by @luacmartins (High confidence)
Related Issues: #82225 (similar issue from previous merchant rules enable attempt)

Recommendation: REVERT

PR #82438 enabled the merchant rules feature by removing the production gate. While the bug exists in the backend API logic (which partially applies rules - updating description but not merchant field), reverting the App PR is the correct action to prevent shipping broken functionality to users. The feature should remain hidden until the backend correctly implements the full merchant rule application including merchant field updates and system messages.

Labels: Keeping DeployBlockerCash (App deploy blocked until revert)

📋 Detailed Analysis

Evidence

PR #82438 removed only the isProduction check from MerchantRulesSection.tsx, making the merchant rules feature visible to all users. The feature was previously gated and this PR enabled it for the first time in this deploy cycle.

The issue describes that when applying a merchant rule with "apply to existing unsubmitted expenses" toggled:

• Description field updates correctly ✓
• Merchant field does NOT update ✗
• No system message appears ✗

This matches the behavior described in issue #82225 from the previous merchant rules enable attempt (PR #81033), which was also reverted due to similar issues.

Verification

• PR Enable merchant rules v2 #82438 modified src/pages/workspace/rules/MerchantRulesSection.tsx
• The change removed the production gate: if (isProduction) { return null; }
• This directly enabled the merchant rules feature that exhibits the reported bug
• The issue is reproducible on staging (where PR Enable merchant rules v2 #82438 is deployed) but N/A on production (where the feature doesn't exist)

Root Cause

The frontend correctly passes shouldUpdateMatchingTransactions: true to the backend API (SET_POLICY_CODING_RULE). The backend API is responsible for updating matching transactions but only partially applies the rule - it updates the description field but fails to update the merchant field and generate system messages.

While the root cause is a backend bug, the correct action per deploy blocker protocol is to revert the App PR that exposed the broken feature to users, then address the backend bug before re-enabling the feature.