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American Express Faces Lawsuit in Rhode Island Federal Court Over Swipe Fees

Lawsuit seeks a court order to halt American Express policies that allegedly violate US antitrust laws

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Staff Writer, TLR

Published on March 26, 2024, 11:48:16

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lawsuit, legal, financial service, American Express, card

American Express is facing a proposed class action lawsuit in Rhode Island federal court, which alleges that the company has overcharged several US merchants for credit and debit card fees on consumer transactions.

Filed by 10 retail plaintiffs, including a delicatessen, fine clothier, florist and furniture store, the lawsuit seeks a court order to halt American Express policies that allegedly violate US antitrust laws.

According to the lawsuit, American Express employs "non-discrimination provisions" to prevent merchants from encouraging customers to use payment cards with lower transaction fees, thereby limiting competition. American

Express and the plaintiffs' attorneys have not yet commented on the lawsuit. The merchants' allegations echo similar claims made against Visa and Mastercard regarding swipe fees in a coordinated legal proceeding in Brooklyn federal court.

While Visa and Mastercard abandoned their rules prohibiting merchants from steering customers towards lower-cost payment methods by the end of 2013, American Express's policies allegedly persist.

The lawsuit asserts that American Express's rules exclusively prohibit US merchants from utilising discounts, surcharges, verbal prompting, signage and other techniques to incentivise customers to use cheaper payment cards.

Furthermore, the presence of binding arbitration clauses between American Express and merchants has reportedly impeded efforts to address the plaintiffs' claims.

Initially, the 5,155 merchants involved in the lawsuit pursued individual claims through arbitration. However, American Express declined to cover a $16 million arbitration invoice, resulting in the cases being administratively closed.

The merchants argue that American Express's default in the arbitration proceedings precludes it from preventing them from pursuing their claims in US court.

According to the lawsuit, credit card swipe fees significantly diminish the earnings of many small business owners, consuming approximately half of their monthly profits.

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