Merchants Stand Up to American Express Over High Swipe Fees

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Small Business Owners Challenge American Express, Alleging High Swipe Fees Undermine Their Profits.

A florist, an Irish Pub and a deli have banded together with other small retailers to sue American Express, alleging the credit card giant’s fees on consumer transactions are too high.

The ten retailers filed a proposed class action lawsuit against American Express on March 21 in a Rhode Island federal court, alleging violations of United States antitrust laws.

According to the lawsuit, American Express has been overcharging thousands of merchants around the country for credit and debit card fees on consumer transactions. At the same time, it has been maintaining strict policies that don’t allow business owners to ask customers to use a cheaper payment method, they say.

The business owners are now seeking a court order that would block those policies.

Amex restricts competition, lawsuit says

American Express limits price competition through its use of “non-discrimination provisions” – or policies – that ban businesses from asking or encouraging customers to use payment cards with lower transaction fees, the lawsuit says.

The retailers say American Express charges them significantly more per swipe than other credit card providers. 

For example, when an Amex cardmember is prompted to switch to a Discover card for the purchase, the merchant saves roughly 15% of the swipe fee, the lawsuit says. 

The savings are even higher if the customer uses debit, the plaintiffs say. “On each transaction that shifts from Amex to debit, the merchant saves roughly 65% of what it would have paid in merchant fees,” they allege.

This is important for small business owners who are surviving on tight margins, the plaintiffs say.

“For many of these merchants, credit-card swipe fees eat up roughly half of what the small business owner can take home at the end of the month.”

Small business seek change

The claims follow similar swipe-fee suits brought against Visa and Mastercard. Last year, a federal appeals court in New York approved a $5.6 billion settlement to end claims from about 12 million retailers against Visa and Mastercard.

By the end of 2013, Visa and Mastercard had already stopped enforcing regulations stopping merchants from directing customers toward lower-cost payment methods, court documents say.

Now, Amex is the only credit card company that prohibits U.S. merchants from using discounts, surcharges, verbal prompting, signage, and other techniques to incentivize shoppers to use cheaper payment cards, the lawsuit says.

Amex policing merchants through customers

In a 2015 antitrust enforcement action brought by the U.S. Department of Justice, the government said American Express actively monitors merchants for non-compliance with its strict policies. 

The department said Amex is known to “vigorously enforce” consequences on merchants – including terminating their card acceptance agreement with the network — if the business is found to be “steering” customers. It said Amex monitored small businesses through random on-site visits, cardholder complaints and by monitoring  the merchants’ charge volume.  

The plaintiffs seek to represent 5,155 merchants nationwide of which Amex has waived the right to compel to arbitration. They’re seeking an injunction that would stop American Express from enforcing its non-discrimination provisions.

The plaintiffs and proposed class are represented by Deepak Gupta of Gupta Wessler; Scott Harris and Peggy Wedgworth of Milberg Coleman Phillips Bryson Grossman; Tracey Kitzman of Song P.C.; and Robert Cohen of Law Offices of Robert W. Cohen P.C.

The American Express swipe fees class action lawsuit is 5-Star General Store et al v. American Express Company, U.S. District Court for the District of Rhode Island, No. 1:24-cv-00106-MSM-LDA.

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