Tags: amex | merchant | debit | surcharges

AmEx Merchant Settlement Allows Different Debit Surcharges

Friday, 20 Dec 2013 05:55 PM

American Express Co. settled two lawsuits by agreeing to let merchants charge customers less if they use a competing debit card instead of an AmEx credit card.

The change, outlined in an AmEx statement, ends a company policy that compelled merchants to charge the same amount no matter what kind of card was used. Retailers now will be allowed to put surcharges on credit cards even if they don’t charge extra for debit cards, which AmEx doesn’t offer. The plaintiffs included Marcus Corp., the Milwaukee-based operator of hotels and movie theaters.

Merchants have pressed for the ability to tack on extra fees and steer customers to other forms of payment that cost retailers less. Visa Inc. and MasterCard Inc. made similar concessions in a 2012 settlement with the industry and a 2010 accord with the U.S. Justice Department. The result could be higher costs for AmEx card users.

“If the merchants can implement something that makes sense for them, they will,” Jason Arnold, an analyst at RBC Capital Markets, said in an interview. Retailers may offer discounts for cash and boost surcharges to cover AmEx’s transaction fees, which average about 2.5 percent.

Any added levy for credit cards or prepaid cards must apply uniformly regardless of the brand, and merchants still can’t steer customers to competing products, according to New York-based AmEx, the biggest credit-card issuer by purchases.

Legal Costs

AmEx agreed to pay as much as $75 million in attorney fees for the plaintiffs and as much as $4 million for notifying merchants.

“Resolving these lawsuits will allow us to stay focused on helping merchants build their business and strengthen their customer relationships,” Tim Heine, managing counsel at AmEx, said in the statement.

The Merchants Payments Coalition, which represents retailers, called the agreement a “mistake that will hurt merchants and their customers,” according to Mallory Duncan, the MPC chairman and general counsel at the National Retail Federation. “Swipe fees will continue to be the fastest-growing expense for merchants” and consumers will still pay “overinflated fees without even knowing it.”

AmEx shares rose 0.5 percent to $86.41 at the close of trading in New York. The stock increased 50 percent this year, more than double the Dow Jones Industrial Average.

The company said in the statement that it would seek court approval for the agreement. Marcus filed a motion in Manhattan federal court to settle one of the lawsuits against AmEx and have it transferred to federal court in Brooklyn, New York, where another group of cases was filed.

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