News[JURIST] Judge Nicholas G. Garaufis [official profile] of the Federal District Court for the Eastern District of New York [official website] decided on Thursday that American Express’ practice of barring merchants from asking customers to use one credit card over another violated the Sherman Antitrust Act [text]. All credit and debit cards companies require merchants to pay them a fraction of the transaction amount as payment for processing the card. However, not all transaction fees were uniform, and American Express found themselves among the most expensive. As a result, the company instituted non-disclosure policies merchants were required to adhere to that prevented them from encouraging customers from using cards that were more economical to process. The decision [opinion] handed down declared that these non-disclosure practices were an unlawful restraint of trade, that harmed competition and prevented merchants from trying to lower their credit card processing costs. The opinion also states that American Express’ actions have increased sale prices by keeping customers unaware of the cost of processing credit cards, forcing merchants to recuperate money lost in fees by raising in-store prices. While merchants and consumers applaud the decision, American Express has expressed disappointment and plans to appeal based on their assertion that without nondisclosure policies, merchants would be free to discriminate against American Express card holders.
In the past few years, there courts have taken on several cases that would define the limits of credit card companies. In June 2013 the Supreme Court decided [JURIST report] that contractual waivers of class arbitration cannot be invalidated under the Federal Arbitration Act [text] because cost of arbitration could exceed potential recovery. In August 2013 Citigroup was ordered [JURIST report] to pay a $590 million dollar settlement for misrepresenting its assets in securities. In April 2014 a federal judge dismissed [JURIST report] a lawsuit that claimed conspiracy between several major credit card companies to require contractual agreements that all disputes be settled in arbitration because there was no evidence of conspirator action. In August 2014 a California district court ruled that the NCAA‘s [JURIST report, official website] bar on student athlete’s receiving a share of revenue generated from the use of their name violated the Sherman Act.
