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American Express Settles Legal Challenges from US Merchants

American Express has agreed to settle two class action lawsuits filed by various US merchants pending approval by the courts. The first lawsuit, filed in 2006, regards the non-discrimination provisions in the company’s merchant contracts. The second lawsuit from 2004 regards American Express’ Honor All Cards provisions. American Express hopes that the settlements will be in balance for both the interests of American Express, card holders, and merchants.

The settlement has four main tenants regarding the lawsuits:

  • Should a merchant surcharge American Express credit card holders the surcharge will be no more than the surcharge for any of American Express’ competitors.
  • The same is true for prepaid or debit cards, the surcharge for American Express will not exceed that of any competitor.
  • American Express will pay attorney fees for both lawsuits to a maximum of $75 million.
  • Any merchants that seek individual lawsuits for damages relating to either the non-discrimination provisions or the Honor All Cards provisions will be limited to time prior to this settlement
  • Merchants will not file any more lawsuits regarding the above mentioned provisions for a minimum of 10 years following the settlement’s approval.

This settlement is arranged to help protect American Express by ensuring merchants won’t use surcharges to steer customers away from using American Express cards. Simultaneously, American Express will be protected from future lawsuits for a minimum of 10 years while providing merchants with flexibility at the point of sale. American Express will compensate for the fees regarding the lawsuits and limit any potential damages from future, individual legal challenges.

Ultimately, American Express lacks the market power of Visa and Mastercard and seeks to remain competitive with the two larger companies. Through this settlement, American Express addresses merchant concerns while protecting American Express members from elevated surcharges at the point of sale.

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