American Express Dragged To Court In Merchants’ Class-Action Over ‘Swipe’ Fees

American Express faces a proposed class action lawsuit in Rhode Island federal court alleging it overcharged thousands of U.S. merchants for credit and debit card fees on consumer transactions.

Ten retail plaintiffs, including a delicatessen, fine clothier, florist, and furniture store, filed the lawsuit seeking a court order to halt American Express policies they claim violate U.S. antitrust law.

The lawsuit accuses American Express of restricting competition through “non-discrimination provisions,” which prevent merchants from encouraging customers to use payment cards with lower transaction fees. American Express and the plaintiffs’ attorneys did not respond immediately to requests for comment.

The claims in this case resemble those against Visa (V.N) and Mastercard (MA.N) in a coordinated legal action in Brooklyn federal court regarding payment card fees. Visa and Mastercard had abandoned rules against merchants steering customers to use lower-cost payment methods by the end of 2013, according to the lawsuit.

A federal appeals court in Manhattan upheld a $5.6 billion settlement involving claims from approximately 12 million retailers against Visa and Mastercard last year, with ongoing litigation against both companies. The lawsuit argues that it is American Express’s rules alone preventing U.S. merchants from using discounts or other techniques to encourage shoppers to use cheaper payment cards.

The lawsuit also mentions that binding arbitration clauses between American Express and merchants have hindered efforts to resolve the plaintiffs’ claims. Initially, the 5,155 merchants involved in the lawsuit filed claims individually in arbitration. However, American Express declined to pay a $16 million arbitration invoice, resulting in the cases being closed administratively.

The merchants argue that American Express’s default in the arbitration proceeding prevents them from now preventing merchants from bringing their claims to a U.S. court. The lawsuit highlights the significant impact of credit card swipe fees on small business owners’ earnings, with these fees often consuming a substantial portion of their monthly income.

The case 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. Plaintiffs 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.