A federal judge in Rhode Island has ruled that American Express must face a class action lawsuit from a group of small merchants who accuse the company of unlawfully overcharging them for credit and debit card transaction fees. The decision allows these merchants, who claim that American Express has violated U.S. antitrust laws, to move forward with their case as a collective group rather than pursuing individual claims.
U.S. District Judge Mary McElroy rejected American Express’s attempt to dismiss the class action and argued that the merchants should be forced to handle their claims separately. In doing so, she opened the door for the merchants to argue their case together, a significant victory for the plaintiffs.
The lawsuit, filed in March, is centered on the use of “non-discrimination provisions” by American Express. These provisions allegedly prevent merchants from encouraging customers to use payment cards that carry lower transaction fees, thereby increasing the cost for businesses. The plaintiffs, which include ten small merchants, argue that this practice not only breaches U.S. antitrust laws but also harms consumers by inflating costs.
While American Express has yet to respond to requests for comment, the ruling has been welcomed by the legal representatives of the plaintiffs. “This is a crucial step for small businesses, ensuring they have an opportunity to present their case in court,” the attorneys said in a statement.
The plaintiffs had initially attempted to resolve their disputes with American Express through arbitration, but the company reportedly refused to pay over $17 million in filing fees for mass arbitration proceedings. According to Judge McElroy, this refusal led to the termination of arbitration, pushing the merchants to pursue legal action instead.
In its defense, American Express argued that its arbitration clauses with merchants should be upheld, pointing to precedents where courts have consistently enforced such provisions. The company also claimed that the plaintiffs had orchestrated an administrative closure of their individual arbitrations.
Although Judge McElroy has allowed the lawsuit to move forward, she has not yet ruled on whether the case will officially be certified as a class action. If the case is certified, it could involve as many as 5,155 merchants who claim to have been impacted by American Express’s practices.
The merchants are seeking a declaration that American Express’s actions are in violation of federal antitrust laws, which could pave the way for individual merchants to pursue monetary damages for the harm caused.
The case is titled 5-Star General Store v. American Express Co (U.S. District Court for the District of Rhode Island, No. 1:24-cv-00106).
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