October 4, 2010
Jefferson City, Mo. -- Attorney General Chris Koster today joined the United States Department of Justice and six states in filing a civil antitrust lawsuit against Visa, MasterCard and American Express for unfair rules the credit card companies have placed on merchants. In addition to serving as Missouri’s Attorney General, Koster serves as cochairman of the National Association of Attorneys General’s Antitrust Committee.
Today’s lawsuit asserts that major credit card companies have forced merchants to sign agreements that they cannot entice consumers to use a particular credit card for transactions, thus preventing any opportunity for consumers to receive any benefit for using a card with lower costs to merchants.
Koster said the Department of Justice and the states have reached a settlement with Visa and MasterCard that the credit card companies will remove language from their rules with merchants that forbid merchants from encouraging customers to select a certain card for purchases. The lawsuit against American Express will continue.
“Credit card companies hold a powerful place in the lives of many Missourians,” Koster said. “Given the increasing role of credit card companies in our everyday lives, it is important that we ensure that credit card merchants abide by federal antitrust rules that maintain a fair and competitive marketplace.”
Koster said merchants must pay fees to credit card companies in order for their customers to be able to use the cards. Those costs are collected from merchants in the form of a “swipe fee” they pay every time a credit card is used. American Express has the highest merchant fees of any credit card network. Merchants pass on these billions of dollars in fees to all their consumers in the form of higher retail prices. In 2009 alone, American Express, MasterCard and Visa and their affiliated banks collected more than $35 billion in these fees from U.S. merchants.
Because of the rules imposed by the credit card companies, merchants have not been able to encourage customers to use a lower-cost card, provide discounts for customers to use cards that cost less, or even inform customers about the cost differences.
Under the agreement with Visa and MasterCard, merchants will be able to:
Koster said the agreement with Visa and MasterCard will take effect upon the court’s approval. Following approval, the companies will be required to promptly modify their merchant rules and direct the banks they work through to send copies of the new rules and other information to retailers.
Koster said American Express is fighting to continue its restrictions on merchants who accept American Express. Koster said American Express forces merchants to sign agreements that include very restrictive language that prevents competition at the point of sale to consumers. Under American Express’s rules:
Merchants must not:
The ongoing litigation against American Express seeks to allow merchants that accept American Express to engage in the same kind of discounting and encouragement that the proposed settlement with Visa and MasterCard allows. Until American Express’s restraints on merchants are lifted, the many merchants that accept American Express, as well as Visa and MasterCard, will not be able to take full advantage of their new options under the proposed settlement, the Department of Justice said.
“I appreciate Visa and MasterCard’s quick decisions to remove the anticompetitive language with retailers using their cards,” Koster said. “Their prompt decision immediately improves the competitive marketplace in the state of Missouri. We will continue to litigate with American Express in the hopes of encouraging similar movement.”
The lawsuit against the credit card companies was filed in U.S. District Court for the Eastern District of New York. Joining the Department of Justice and the state of Missouri in the lawsuit are the states of Connecticut, Iowa, Maryland, Michigan, Ohio and Texas.