The United States Justice Department on Monday sued the three largest U.S. credit card companies for anticompetitive practices and reached a proposed settlement with two of them, MasterCard and Visa.
American Express Co. however, said it will fight against the federal lawsuit, arguing that the Justice Department’s proposed remedy would promote steering customers from one payment network to another and “will do nothing to enhance competition.”
The department of Justice and various state attorneys general sued all three companies, saying they were attempting to insulate themselves from competition.
At the same time, the Justice Department filed a settlement it has reached with Visa and MasterCard. Court approval of such settlements is usually a formality. Under the settlement, Visa and MasterCard agree not to prohibit merchants from offering customers discounts or rebates for using a particular kind of card. Visa and MasterCard also must allow merchants to express preferences for the use of a low-cost card within a network or other form of payment.
The lawsuit says the card companies are impeding merchants from promoting the use of competing credit or charge cards with lower acceptance fees.
Each time consumers use a credit card to make a purchase, the merchant must pay a fee. Such fees brought in $35 billion last year to the three credit card companies and their affiliated banks.