American Express Faces Antitrust Complaint

MANHATTAN (CN) – In an antitrust class action against American Express, the National Supermarkets Association claims its members have to raise prices across the board because of a surcharge that AmEx imposes on retailers. The group of 400 independent grocers claims AmEx’s surcharge is illegal.

     If a customer puts $100 worth of products on an American Express credit card, and the “merchant discount fee” is 2 percent, American Express bills the customer for $100 and pays the merchant only $98.
     “By ensuring that the consumer neither knows nor cares how expensive her payment product is to the merchant, and thus has no incentive to switch to an alternative payment form, or a competitor of American Express, the anti-steering rules serve to entrench American Express’ position of monopoly power in the U.S. markets for American Express payment card services, among other markets,” according to the federal complaint.
     The National Supermarkets Association claims that American Express’ merchant reference guide prohibits merchants from encouraging customers to use a different form of payment than American Express, making the credit-card company “largely impervious to price-based competition.”
     “If the merchant were free to pass along the discount fee directly to the Amex card user via a discrete surcharge, the card member [sic] could decide for herself if she wants to incur the costs necessary to fund these perks,” according to the complaint. “While an affluent shopper who is 200 points shy of a free trip to Hawaii may not balk at an extra $2 on her check-out ticket, the cash-payer and on-line debit user will be relieved of the obligation to subsidize that particular junket.”
     After Discover, Visa and MasterCard bent to class actions in the past 5 years, they rescinded their surcharges and prohibitions against merchant steering, the trade group claims.
     “If merchants were able to steer transactions to payment forms other than American Express, they would realize significant savings,” according to the complaint. “In a competitive marketplace, those savings will be passed along to all consumers in the form of lower prices for all.”
     The supermarket group claims that since it cannot give customers an incentive to choose a different form of payment, its members must raise prices for everyone.
     All customers are forced “to subsidize all of the costly perquisites enjoyed by card members using Amex-branded payment card products, including frequent flier miles, rental car insurance, free gifts and even cash-back rewards,” according to the complaint.
     The association sued American Express and American Express Travel Related Services, seeking declaratory and injunctive relief. It is represented by Noah Shube.

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