American Express drops surcharge ban in settlement with merchants
NEW YORK (Reuters) - American Express Co (AXP.N) 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(V.N) and MasterCard Inc(MA.N) 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.
(Editing by Eric Walsh)
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