Class Certified for Debit Card Users’ Suit Against Amex

U.S. District Judge Nicholas G. Garaufis on Tuesday allowed a class action lawsuit to move forward against American Express for allegedly forcing a rise in merchant transaction fees resulting in hundreds of millions of dollars in increased charges for consumers.

The certified class consists of debit card users in a handful of states who do not and have not used American Express cards. They allege that American Express’s non-discrimination provisions in merchant contracts violate state antitrust and consumer protection laws. The suit, in the United States District Court for the Eastern District of New York, involves card users in Ohio, Illinois, North Carolina, Maine, Kansas, and D.C., among others.

According to the plaintiffs, American Express’s non-discrimination provisions are a vertical non-price restraint on trade because they restrict merchants from communicating to customers a preference for one payment network over another, sharing the fee that they pay for each payment network, or charging a different price based on the cost of processing the payment, thereby shielding American Express and other payment networks from competition.

Because of these restrictions, the plaintiffs argue, American Express can raise or maintain its merchant fees without affecting usage of its network. In addition, because American Express gives its cardholders rewards for using its cards, cardholders are incentivized to use their American Express cards more. The plaintiffs argue that this harms non-American Express cardholders by effectively forcing them to subsidize American Express cardholders’ consumption. Without the current scheme, they argue, prices would generally be lower.

Class certification for credit card users was denied because of the differences among those potential class members with respect to things like rewards programs.

Additional Reading

Debit card users can sue American Express as a class over fees, judge rules, Reuters (January 10, 2024)

Oliver et al. v. American Express January 9, 2024 Memorandum & Order

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