A federal judge rejected a settlement between American Express and merchants over credit card fees after discovering that the merchants' lawyer inappropriately communicated privileged details of the case with an attorney for MasterCard. The decision, which could have ripple effects for another settlement agreement between many of the same merchants and MasterCard and Visa, means that the merchants and Amex will have to renegotiate the deal or possibly go to trial.
Under the Amex settlement announced in 2013, the card company agreed to end a company policy regarding surcharges. Specifically, the settlement stipulated that American Express cold no longer prohibit merchants from charging customers more for using Amex, as long as the merchants impose an identical surcharge on other credit cards.
Merchants involved in the parallel Visa/MasterCard litigation have already filed a motion in that case arguing that case's settlement should also be rejected because of the communications between the two lawyers. The Merchants Payments Coalition, of which NATSO is a member, contends that neither settlement provides merchants with what they really need, which is greater discretion to add surcharges to help make up the costs associated with credit card fees.
In his ruling, Judge Nicholas Garufis of the Eastern District of New York (Brooklyn) detailed why the two cases are so closely tied: Because the Amex settlement permits Amex to require merchants to charge the same prices for goods purchased with Amex as with all other cards, Visa and MasterCard could freely agree in their separate settlement to allow differential surcharges. In effect, that provision would be negated because Amex is still able to ban it (since many merchants accept both cards). By sharing details regarding the two cases' settlement negotiations, the judge said, the lawyer for the merchants (who represented the merchants in both cases) and the lawyer for MasterCard inappropriately colluded.
A different federal judge in the Eastern District of New York will rule on the merchants' motion to vacate the nearly $6 billion settlement between merchants and Visa and MasterCard later this year.
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