American Express Merchants Class Action Lawsuit Explained

The American Express Merchants Class Action Lawsuit is a significant case that affects many businesses. This lawsuit was filed due to American Express's merchant agreement, which included a no-surcharge policy.

American Express merchants are not allowed to charge customers a fee for using the card, but they can still pass on the cost of processing the transaction to the customer. This policy has been a point of contention for many merchants.

The lawsuit claimed that American Express's no-surcharge policy was anticompetitive and harmed merchants. The court ultimately ruled in favor of American Express, stating that the policy was not a violation of antitrust laws.

Many merchants were affected by this lawsuit, with some estimating that they lost hundreds of thousands of dollars due to the no-surcharge policy. The ruling had significant implications for businesses that accept American Express cards.

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The court proceedings in the American Express merchants class action lawsuit have been a long and winding road. In October 2010, the United States Department of Justice (DOJ) filed a civil antitrust lawsuit against Visa, MasterCard, and American Express in United States District Court for the Eastern District of New York.

The lawsuit alleged that American Express's anti-steering language violated antitrust laws by preventing merchants from reducing their costs of business and raising prices to consumers. The DOJ's suit was joined by several states, and after a seven-week trial, the District Court ruled in favor of the DOJ and states in February 2015.

However, American Express appealed the decision to the 2nd Circuit Appeals Court, which lifted the injunction placed by the lower court in December 2015. The Appeals Court reversed the lower court ruling in September 2016, arguing that the plaintiffs had not shown harm to merchants or consumers from American Express's anti-steering language.

The DOJ petitioned the Appeals Court to reconsider the case, but the Court refused to do so by January 2017. The case was then appealed to the Supreme Court, which accepted it in October 2017. The Supreme Court issued a 5-4 decision in June 2018, affirming the Appeals Court's ruling and finding that American Express's steering provisions did not violate antitrust law.

In a separate case, a federal judge denied American Express' motion to dismiss a federal antitrust lawsuit brought by 5-Star General Store on behalf of over 5,000 merchants in December 2019. The judge ruled that American Express was in default after failing to pay filing fees to the American Arbitration Association.

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The proposed class action lawsuit alleges that American Express breached antitrust law and overcharged thousands of U.S. merchants for credit and debit card fees on consumer transactions. The lawsuit argues that American Express' rules prohibit merchants from steering customers towards payment cards with lower transaction fees, thus constraining competition.

Here's a list of key court proceedings in the case:

The American Express merchants class action lawsuit is a significant case that involves ten small businesses accusing the company of overcharging them for credit and debit card transaction fees. The lawsuit was initially filed in March and involves more than 5,000 merchants who have sought to arbitrate their claims against American Express.

The class action lawsuit alleges that American Express's "non-discrimination provisions" unfairly inflate the cost of credit card payments for businesses, thus violating antitrust laws designed to promote fair competition. This is a major issue for small businesses with tight margins, such as grocery stores, local retailers, and restaurants.

The merchants are seeking a formal declaration that American Express's practices constitute an illegal restraint of trade. They are represented by a team of attorneys who are working to bring their case to court and have expressed satisfaction with the court's ruling that allows them to pursue the case collectively.

Here are the key details of the class action lawsuit:

A class action lawsuit is a way for a group of people to come together and sue a company for something they all have in common. In this case, ten small businesses filed a class action lawsuit against American Express.

The lawsuit claims that American Express charges high swipe fees, which can be as much as 3% of each transaction. This can be a huge burden for small businesses, especially those with tight margins.

The class consists of 5,155 merchants who were initially seeking to arbitrate their claims against American Express, but the company declined to pay over $17 million in filing fees, causing the arbitration to be closed.

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Here are the key details about the class action lawsuit:

The Federal Arbitration Act (FAA) allows parties in arbitration contracts to agree to whatever terms they see fit, including bilateral arbitration. This means that parties can choose to settle disputes individually rather than as a class.

American Express asserts that choosing bilateral arbitration is a procedural decision that falls within the scope of the FAA because it doesn't affect the parties' substantive remedies. In other words, it's a matter of how disputes are resolved, not what rights the parties have.

The FAA favors actual arbitration, but it doesn't give a de facto immunity to one party through arbitration. This is known as the effective vindication rule, which applies when the FAA clashes with another federal law.

Courts can refuse to enforce class-arbitration waivers and permit class-action lawsuits where a plaintiff's individual claim is worth much less than the cost of bringing that claim.

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The case at hand addresses the issue of whether arbitration agreements that mandate bilateral, rather than class action, arbitration should be enforced according to their terms.

Courts are debating how much deference they should give to arbitration agreements, with some arguing that they have broad, positive benefits for the national economy, including lower prices for consumers and higher wages for employees.

The complexity and expense of antitrust claims necessitate class action, as it is financially irrational for any claimant to proceed individually.

Arbitration agreements are being challenged due to the loss of "effective vindication" for plaintiffs with small claims.