Judge Denies American Express Motion to Dismiss Federal Antitrust Lawsuit

A federal judge denied American Express’ motions to compel arbitration and to dismiss a federal antitrust lawsuit brought by 5-Star General Store on behalf of more than 5,000 merchants.

U.S. District Judge Mary S. McElroy ruled Monday (Dec. 2) that American Express was in default after failing to pay filing fees to the American Arbitration Association, so the court denies the company’s motion to compel arbitration.

In the lawsuit, 10 small merchants allege that American Express violates antitrust law by prohibiting businesses from encouraging their customers to use payment cards that have lower transaction fees, Reuters reported Monday.

American Express argued that the merchants should be required to pursue individual claims rather than a class action and that their charges should be arbitrated, according to the report.

“For over a decade, courts across this country — all the way to the U.S. Supreme Court — have held that Amex’s arbitration provisions with merchants are valid and must be enforced,” the company argued, per the report.

While the merchants had valid arbitration agreements and sought to arbitrate their claims before filing their lawsuit, the arbitrator closed the proceeding after American Express declined to pay $17 million in filing fees, the judge ruled, according to the report.

Though McElroy denied American Express’ motion to dismiss the suit, McElroy has not yet ruled on whether to certify it as a class action, per the report.

The proposed class action lawsuit was initiated in March by 10 retail plaintiffs who alleged that American Express breached antitrust law and overcharged thousands of U.S. merchants for credit and debit card fees on consumer transactions.

The dispute centers on the company’s purported use of “non-discrimination provisions” to prevent merchants from steering customers towards payment cards with lower transaction fees, thus constraining competition.

The lawsuit argues that American Express’ rules prohibit U.S. merchants from employing discounts, surcharges, verbal prompting, signage and other tactics to incentivize customers to use other payment cards.

The plaintiffs also contended that binding arbitration clauses between American Express and merchants had impeded efforts to resolve their claims but that the company’s alleged default in the arbitration process meant that the company could not prevent them from pursuing their claims in court.