For decades, credit card companies have imposed illegal and anti-competitive rules upon millions of merchants across the U.S. The rules prohibited merchants from acts such as telling a customer that they prefer another card or charging customers a surcharge for using cards with high swipe fees. Then, in 2010, the Department of Justice and 17 states (collectively, DOJ or Plaintiffs) filed a federal antitrust complaint in Manhattan against Visa, MasterCard and American Express challenging the companies’ use of merchant restraints. The DOJ asserted that the credit card issuers’ practices “prevent merchants from offering consumers discounts, rewards and information about card costs” and result “in consumers paying more for their purchases” because the “rules increase merchants’ costs of doing business.” Less than a year later, Visa and MasterCard agreed to cancel their merchant restraints and paid more than $7 billion to settle separate class action lawsuits brought by merchants.
American Express, on the other hand, declined to settle and has been entrenched in litigation for the past five years. But in February this year, U.S. Judge Nicolas Garaufis ruled that American Express’ practices violate Section 1 of the Sherman Act by unreasonably restraining trade. The court found that the rules had adverse effects on competition because they “impaired the competitive process in the network services market, rendering low-price business models untenable, stunting innovation, and resulting in higher prices for merchants and their consumers.” American Express appealed the decision to the Second Circuit; however, in October it changed its rules to comply with the judge’s injunction.
In response to this recent victory, lawyers for the City of San Francisco filed a complaint against American Express last month. The suit, filed on behalf of the Citizens of California, is an attempt to recover reimbursements and penalties based on the company’s restraint of trade and unfair competition. If you need more information on this matter, contact Jake Jeter, a lawyer in our firm at 800-898-2034 or by email at Jake.Jeter@beasleyallen.com.
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