American Express drops surcharge ban in settlement with merchants

NEW YORK Thu Dec 19, 2013 6:58pm EST

NEW YORK Dec 19 (Reuters) - American Express Co has agreed to let merchants charge extra for transactions paid with the company's credit and charge cards, in a legal settlement that its proponents said could change consumer spending habits.

The settlement resolves two class actions filed by merchants that have been pending for several years.

In court papers filed on Thursday, lawyers for the merchants wrote that the settlement represents "some of the most consequential relief ever obtained in a private enforcement action under the U.S. antitrust laws."

Businesses have long complained about the rising costs associated with accepting credit and charge cards that help pay for cardholder rewards.

"The old rules forced consumers using cash, debit and even electronic benefits cards to subsidize the high swipe fees that credit card companies charge to pay for rewards," Gary Friedman, an attorney for merchants, said in a statement.

The ability to surcharge transactions paid by those cards will give merchants more power to control those costs by encouraging consumers to use cheaper forms of payment, like debit cards, Friedman said.

American Express managing counsel Tim Heine suggested that some merchants would not take advantage of the ability to surcharge.

"While the modification of our contract provisions gives merchants some additional flexibility, many merchants continue to believe, as we do, that surcharging is fundamentally anti-consumer," Heine said in a statement. "Few merchants have taken advantage of earlier opportunities to surcharge out of concern that it could risk alienating customers, and drive them to patronize competitors who do not surcharge."

As part of the legal settlement, which must receive court approval, American Express said it had agreed to pay up to $75 million in attorneys' fees for both cases.

The agreement comes after a federal district court judge in Brooklyn last week approved an estimated $5.7 billion class action settlement brought by merchants against Visa Inc and MasterCard Inc challenging their rules.

As part of that settlement, merchants also won the right to surcharge customers who use MasterCard and Visa credit cards in certain circumstances.

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see
Comments (1)
9zoroaster wrote:
OMG! These credit card companies are really shaking in there boots right now. The merchant can now charge up to 4 percent surcharge to the customer. Good bye rewards card, hello to more in-store discounts cards and store rewards. Good bye to the, “sorry, we don’t take credit cards here because it cost us to much, but feel free go over and spend two to three dollars to get your money out of that ATM machine we conveniently keep over there in the corner.” Yeah. Go ahead and start your anti-surcharge campaign across America. Eventually the merchants will catch on and charge, which will create lower transactions fees and processor competition on a whole new scale. It truly is the Dawn of a new day in the financial world, unfortunately most people haven’t notice yet.

Dec 23, 2013 8:20pm EST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.