PROVIDENCE, R.I. — A federal court in Rhode Island has allowed a group of small business owners to proceed with a class action lawsuit against American Express. The merchants accuse the financial services corporation of imposing excessive transaction fees and allege that these practices violate U.S. antitrust laws aimed at ensuring fair competition.
The ruling, issued by U.S. District Judge Mary McElroy, comes as a significant setback for American Express, which had sought to have the claims addressed individually rather than collectively. The decision underscores a critical moment for the plaintiffs, comprising ten small businesses, who argue that American Express’s “non-discrimination provisions” restrict them from encouraging customers to use less costly payment methods.
These provisions, the plaintiffs claim, prevent them from steering consumers towards alternative payment options that incur lower fees, thereby inflating costs unjustly and maintaining a monopolistic hold over payment methods. The merchants have pushed for a formal declaration that these practices represent an illegal restraint of trade, arguing that they undermine the principles of free and competitive market operations.
The contention points to broader issues within the credit card processing industry, where major companies like American Express dictate terms that smaller retailers often challenge as unfair. This case highlights the tension between large financial institutions and small businesses over fee structures and payment processing options.
In light of the judge’s decision, American Express faces greater scrutiny over how its policies affect merchant operating costs and consumer choice. The company, which did not provide comments on the ruling, had previously tried to get the lawsuit managed on a case-by-case basis, claiming the varied nature of merchant experiences made a collective lawsuit unsuitable.
However, the plaintiffs’ attorneys have welcomed the judge’s ruling, noting that it paves the way for small businesses to seek justice collectively rather than individually, a process that many find daunting and expensive. Previously, over 5,000 merchants attempted to arbitrate their complaints against American Express. Nonetheless, arbitration efforts were stalled when American Express reportedly failed to pay required fees exceeding $17 million, prompting an arbitrator to terminate the proceedings.
This case could potentially set a precedent affecting how transaction fee practices are treated under U.S. antitrust laws and may influence negotiations between merchants and credit card companies going forward.
As this legal battle unfolds, it will be important to monitor how it impacts the broader landscape of merchant services and whether it prompts changes in the policies of major credit card processors regarding fee transparency and fairness.
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