Class of Merchants Sues American Express

LOS ANGELES (CN) - American Express made "tens of millions of dollars" unfairly by charging fees on gross sales instead of net sales, without properly informing merchants it was doing it, and by charging "discount fees" on "transactions that never occurred" because the items were returned, a class action claims in Federal Court.

American Express requires merchants who accept its card to enter into a contract in which the merchants pay a "discount fee," a percentage of each sale made using American Express.

When an item is returned and the transaction voided, American Express still charges the fee, says lead plaintiff "The Wild Grape," a California-based retailer.

The arrangement is not disclosed in the initial fee agreement and is concealed in monthly statements making it unlikely that merchants will recognize how they are being charged, the complaint states.

The complaint states: "American Express also charges a discount fee on transactions that were never completed because the item was returned. Not only was it unfair to the merchant for American Express to charge a discount fee for a transaction that did not result in a purchase or the extension of credit, but American Express failed to disclose the practice in its agreement. As a result, merchants, such as The Wild Grape, have been unfairly charged discount fees on transactions that never occurred."

The class demands damages for unfair business practices, false advertising, fraud, negligence and breach of good faith. It is represented by Richard D. McCune with McCune Wright.

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