American Express Loses Appeal re Class Action Litigation

Late last week the US Court of Appeals for the Second Circuit struck down a mandatory arbitration clause in contracts by American Express that banned any type of class litigation. Here's the text of the court's decision .

The original litigation was brought in 2003 by a group of merchants seeking to have American Express offer different pricing for acceptance of its revolving credit card products vs. its traditional personal and corporate charge card products.

The plaintiffs assert that, by means of the “Honor All Cards” provision, merchants are faced with the choice of paying supracompetitive merchant discount fees (i.e., fees above competitive levels) on Amex’s new mass-market products or “inevitably los[ing] a significant portion of the sales they receive from businesses, travelers, affluent consumers, and others” who are the traditional users of Amex charge cards. This, the plaintiffs claim, amounts to an illegal “tying arrangement,” in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1."