The antitrust lawsuit filed against Visa and MasterCard for charging unreasonable fees to merchants just got stronger with six states including Missouri, joining hands with the United States Justice Department. This civil lawsuit alleges that these banks are subjecting merchants to anti-competitive rules that are considered unfair and unlawful.
As per the terms mentioned in the lawsuit, the credit card companies forcibly elicited consent from the merchants and made them sign on forms that specified that the merchants would lure customers into using certain types of credit cards that had high fees associated to them. The agreement signed by the merchants with the bank also stipulated that the merchants would not ask the consumers to opt for cheaper payment options.
Though a settlement has now been reached between the Justice Department of the United States and MasterCard and Visa, the court approval is being awaited. As per the rules of the settlement reached, banks will remove clauses in their agreements that stipulate that merchants should not reveal the transaction charges to consumers. Chris Koster, an attorney general from Missouri also mentioned that the new rules also give permission to the merchants to request consumers to pay for their goods or services using cards that charge lower fees.
While Visa and MasterCard have given their approval for this new settlement, American Express has not accepted it. This implies that the litigation against American Express will still remain open. Kenneth Chenault, the CEO and Chairman of American Express clearly mentioned that his company does not have any intention of settling this case any time soon. American Express is one of the credit card lenders whose fees are extremely high as compared to the other banks.
Koster said that each time a consumer paid for his purchase using the credit card, the merchant who owned the business has to pay "swipe fees" to the bank. In order to make good for these charges, the merchants had to levy extra charges on consumers. This led to merchants and customers undergoing loss. The highest swipe fees are being levied by American Express followed by Visa and MasterCard. Each year, these banks make profits to the tune of $35 million just through these fees.
Despite knowing the truth behind the usage of credit cards for purchases, merchants could not reveal it to the consumers because of the agreement they signed with the banks.