Class Action Says Anti-Steering Rules in American Express Merchant Agreements Violate Antitrust Law, Inflate Consumer Prices

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Ten consumer plaintiffs and a number of merchants have put their names on a lawsuit in which they allege American Express and American Express Travel Related Services Company have run afoul of federal antitrust laws by including in merchant agreements a non-discrimination provision that leads non-Amex-using consumers to pay inflated prices for goods and services.

The non-discrimination provisions, which the 92-page proposed class action refers to as “anti-steering rules,” affect consumers who use forms of electronic payment other than American Express cards, the lawsuit says. According to the suit, the defendants’ anti-steering rules prohibit merchants that accept Amex cards from “steering” customers toward the business’ preferred card network, which the case points out often occurs with “buy one, get one free” promotions and coupons that offer a percentage off the price of a product in the future. In such situations, the case elaborates, merchants who are unrestrained from Amex’s anti-steering rules could offer, say, a discount for using Visa, or free shipping with use of another credit card.

Amex’s anti-steering rules, the complaint claims, have the effect of increasing two-sided credit card transaction fees to “supra-competitive levels” while also producing fewer total credit card transactions for merchants and raising prices for consumers. More broadly, however, Amex’s anti-steering restrictions, according to the suit, unreasonably restrain trade within the two-sided consumer-merchant market for general purpose credit card transactions.

The allegations detailed in the lawsuit have an extensive history. After a seven-week bench trial in 2014 in which Amex defended antitrust claims brought by the federal government and some state attorneys general, the suit says, the court found that Amex’s use of anti-steering rules successfully prevented merchant steering, which effectively handcuffed the market and enabled Amex, Visa, Mastercard and Discover to charge higher merchant fees. The court also found Amex’s anti-steering rules caused price increases for consumers, “for the reason that merchants pass on most, if not all, of their higher costs to the customers” in the form of higher prices for goods and services.

“Indeed, any consumer who pays by means other than an American Express card ends up subsidizing Amex’s premium rewards to American Express cardholders,” the suit reads. “Those rewards are paid for by the excessive merchant fees, which Amex extracts from card-accepting merchants. The merchants pass-on those costs in the form of higher retail prices, paid by every purchaser." 

Noted in the complaint is that the consumer plaintiffs had previously filed suit against Amex over the same allegations. That lawsuit and a number of others were consolidated by New York’s Eastern District in August 2015, after which the plaintiffs voluntarily dismissed the consolidated action before the court dismissed the case without prejudice in October 2015.