On Friday, March 22nd, 2024, it was announced that American Express will be sued over its merchant fees in a lawsuit held at Rhode Island federal court. 5,155 merchants claim that Amex’s high fees – in addition to their rules that restrict merchants from encouraging the use of alternative payment methods – impact the profitability of their businesses.

Amex has notably higher merchant and transaction fees in comparison to Mastercard and Visa. These fees impact the merchant, who may charge you more for the purchase to make up for it. When using Amex for the likes of online casinos, ensure that no additional fees are charged specifically for Amex deposits. In this guide, Sergio Zammit highlights Amex-friendly casinos with low deposit charges.

Additional fees may also be implemented when completing online shopping purchases with Amex. Across the board, online shopping swipe fees have been found to be generally higher than in-store. This means that American Express can also impact the price paid for eCommerce, both for the merchant and the consumer.

The lawsuit was filed by a florist, a furniture store owner, and a fine clothier, in addition to several other local retail plaintiffs.

Specifically, the lawsuit highlights Amex’s “non-discrimination provisions”. These provisions effectively bar merchants from using signage, shop discounts, or other measures aimed at encouraging customers to use low-fee cards. The merchants involved in this lawsuit claim that Amex’s rules even prevent them from verbally encouraging their customers to use alternative payment methods.

The inflated charges are said to not only impact businesses but also consumers, who are forced to pay an increasing amount for goods and services when using American Express. Many businesses feel they have no choice but to pass on the swipe fee to the consumer.

According to the Merchants Payments Coalition, swipe fees are the second most expensive operating cost for many businesses, beaten only by the cost of labor.

This lawsuit forms part of the long-running litigation against Amex for driving up merchant fees. On January 10th, 2024, U.S. District Judge Nicholas Garaufis stated that debit card users in a select few states had the right to take class action against Amex over the overcharging of merchants’ fees.

Following this, several law firms across the country began to question the legality of Amex’s anti-competitive measures, and have since offered to pursue arbitrations on merchants’ behalf. Specifically, these firms claim that the tactics implemented by Amex are a violation of the US antitrust law.

Previously, all 5,155 merchants involved in the current claim had brought claims against Amex through individual arbitrations. However, Amex refused to pick up the arbitration invoice of $16 million, which led to the initial case being closed.

The high price of offering Amex as a payment method is the reason why many businesses don’t support it in the first place. You’re more likely to find Amex at airports, hotels, and restaurants than you are at small businesses. However, to make their trade more inclusive to all customers, many smaller businesses feel pressured into offering the payment method.

According to Bankrate, the current merchant fee rate for Amex falls somewhere between 2.5 and 3.5%. Many of the merchants involved in the ongoing lawsuit claim that their American Express merchant rates have been considerably higher.

Bankrate also claims that the merchant fee rate for Visa and Mastercard is between 1.5 and 2.5%. This difference is said to have an impact on the livelihood of small businesses – particularly when handling larger transactions.

Both Visa and Mastercard have previously come under fire for prohibiting merchants from encouraging the use of alternative and cheaper methods.

These companies even faced a coordinated legal proceeding in Brooklyn regarding their swipe fees and restrictive measures. This resulted in both banking companies dropping their respective non-discrimination provisions in 2013. At this point, American Express remains the only major payment method with such provisions in place.

On March 26th, 2024, Visa and Mastercard announced that they planned to significantly reduce their business swipe fees. Like Amex, these payment card service companies have long been accused of charging inflated swipe prices for transactions.

This policy is set to last for 5 years. During this time, the companies hope to reestablish their image as a reliable payment solution for businesses of all sizes. It is claimed that this could save retailers roughly $30 billion.