Credit card surcharge rules have been the subject of ongoing legal and regulatory scrutiny as merchants seek greater flexibility in managing the costs associated with card acceptance. At the center of many disputes are questions surrounding merchant steering practices, network rules, and the balance of power between payment card issuers and businesses. These legal battles have played an important role in shaping how merchants communicate payment costs to consumers and how payment networks compete for transaction volume.
The legal dispute involving American Express highlights the continuing debate over credit card surcharge rules and merchant rights. Court decisions in cases involving card network policies can have far-reaching implications for merchants, financial institutions, and consumers alike, influencing everything from payment acceptance strategies to competitive dynamics within the payments industry. As litigation continues, these cases remain closely watched because they help define the regulatory framework governing payment card acceptance in the United States.
This is reaching TV-lawyer levels of drama.
In the latest development in American Express Co.’s dispute with merchants over their credit card surcharge and steering policies, a U.S judge rejected a negotiated settlement based on concerns about the conduct of the plaintiffs’ attorney.
“The retailers used an exchange of e-mails between the plaintiffs’ lead lawyer Gary Friedman and Keila Ravelo, who represented MasterCard in a separate case, to support their assertions that the deals were rigged.
The rejection means that merchants and the card firm may have to renegotiate the deal or possibly go to trial. A conference is scheduled in Brooklyn, New York federal court for Oct. 5 to discuss the next steps.
The retailers sent a notice to Visa and MasterCard lawyers last week that they would seek to throw out that deal as well. No action has been taken on that request.”
American Express expressed their disappointment with the judge’s decision.
“The New York-based card company is “disappointed in the court’s decision to deny final approval of the settlement,” Chao [spokeswoman for American Express] said. “We continue to believe the agreement was fair.”
And the lawyer for the plaintiffs, Gary Friedman expressed his disappointment while maintaining his innocence.
“Friedman said in an e-mail Tuesday that he is “deeply disappointed, but I respect the decision of the court.”
“I never took any steps that were contrary to the interest of my clients, the merchants,” he said. “I have always acted to promote their welfare.”
The ongoing debate over credit card surcharge rules illustrates the complex relationship between payment networks and merchants. While payment providers seek to protect the value of their brands and cardholder experience, merchants continue to advocate for greater flexibility in managing acceptance costs and communicating those costs to customers. Court rulings and settlement negotiations in these cases can influence industry practices for years to come.
Although the rejection of a proposed settlement does not determine the ultimate outcome of the dispute, it demonstrates the careful judicial oversight applied to major antitrust and merchant litigation. As payment networks, merchants, and regulators continue to navigate these issues, the evolution of credit card surcharge rules will remain an important factor shaping competition, merchant acceptance policies, and the broader payments ecosystem.
Overview by Alex Johnson, Sr. Analyst, Credit Advisory Service at Mercator Advisory Group