US sues American Express, Master, Visa cards

The US Justice Department has filed a law suit against three major credit card companies -- American Express, Masters and Visa -- challenging their rules that prevent merchants from offering consumers discounts, rewards and information about card costs, ultimately leading to consumers paying more for purchases.

At the same time, the department announced that it has filed a proposed settlement with Visa and MasterCard that, if approved by the court, would require the two companies to allow merchants to offer discounts, incentives, and information to consumers to encourage the use of payment methods that are less costly.

The complaint accuses American Express, MasterCard and Visa of maintaining rules that prohibit merchants from encouraging consumers to use lower-cost payment methods when making purchases.

For example, the rules prohibit merchants from offering discounts or other incentives to consumers in order to encourage them to pay with credit cards that cost the merchant less to accept, it said.

"With today's lawsuit we are sending a clear message: We will not tolerate anticompetitive practices," said Attorney General Eric Holder.

"We want to put more money in consumers' pockets, and by eliminating credit card companies' anticompetitive rules, we will accomplish that," he said.

The Department of Justice said, credit card acceptance costs US merchants approximately USD 35 billion each year.

Those costs are collected 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.

"By preventing merchants from rewarding consumers when they use less expensive credit cards to make a purchase, American Express, MasterCard and Visa have inhibited merchants' ability to reduce card acceptance costs, and therefore their retail prices to consumers," the Justice Department said in its statement.

The proposed settlement requires MasterCard and Visa to allow their merchants to offer consumers an immediate discount or rebate or a free or discounted product or service for using a particular credit card network, low-cost card within that network or other form of payment.