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Class Action Lawsuit Accuses American Express of Overcharging Merchants

 |  March 27, 2024

American Express finds itself embroiled in a legal battle as a proposed class action lawsuit, filed in Rhode Island federal court, alleges the company of overcharging thousands of US merchants for credit and debit card fees on consumer transactions.

The lawsuit, initiated by ten retail plaintiffs including a delicatessen, fine clothier, florist, and furniture store, seeks a court order to halt American Express policies that allegedly breach US antitrust law, as reported by Reuters.

At the crux of the dispute are American Express’s purported use of “non-discrimination provisions” to prevent merchants from steering customers towards payment cards with lower transaction fees, thus constraining competition, according to the lawsuit. American Express has yet to respond to requests for comment on the matter.

The merchants’ grievances echo similar allegations against Visa and Mastercard in a consolidated legal action in Brooklyn federal court regarding payment card fees. Notably, Visa and Mastercard had abandoned regulations preventing merchants from encouraging the use of lower-cost payment methods by the end of 2013, as highlighted in the lawsuit.

Last year, a federal appeals court in Manhattan upheld a substantial $5.6 billion settlement involving approximately 12 million retailers against Visa and Mastercard. Despite this, ongoing litigation against the two companies persists.

The lawsuit singles out American Express, arguing that its rules exclusively prohibit U.S. merchants from employing discounts, surcharges, verbal prompting, signage, and other tactics to incentivize customers to use more economical payment cards.

Additionally, the plaintiffs contend that binding arbitration clauses between American Express and merchants have impeded efforts to resolve their claims. Initially, the 5,155 merchants involved in the lawsuit pursued individual claims through arbitration. However, American Express purportedly refused to pay a $16 million arbitration invoice, resulting in the closure of these cases, as outlined in the lawsuit.

Given American Express’s alleged default in the arbitration process, the plaintiffs assert that the company cannot now prevent them from pursuing their claims in a U.S. court. The lawsuit marks another chapter in the ongoing legal saga surrounding payment card fees and merchant practices, underscoring the complexities of the financial landscape and the regulatory challenges within it.

Source: Reuters