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Vermont Joins Antitrust Lawsuit Against Credit Card Companies

CONTACT: Sarah London, Assistant Attorney General, (802) 828-5479

December 21, 2010

Vermont has sued American Express, Visa, and MasterCard to stop them from restricting merchants from offering consumers discounts, rewards, and information about card costs. Attorney General William Sorrell joined the U.S. Department of Justice and nineteen states in filing an amended complaint late yesterday challenging the credit card companies’ rules which ultimately result in greater costs to consumers and merchants. Vermont also joined a proposed settlement with two of the companies. Although Visa and MasterCard have agreed to settle the case, American Express continues to fight the allegations.

“Vermont has been a leader in taking on the credit card industry for practices that stifle competition – first through legislation and now through litigation. In these tough economic times it’s more important than ever to protect our businesses and consumers from unfair fees and costs,” said Attorney General Sorrell.

All three companies must also comply with a Vermont law that goes into effect on January 1, 2011, which eliminates restrictions on merchants that have been in place for many years. Under the new law, credit card companies must allow merchants to offer discounts and incentives based on the customer’s form of payment. For example, a merchant will be able to offer a 3% discount if the customer pays in cash. The companies also must allow merchants to accept certain cards at some locations and not others, and to impose a credit card minimum of $10 if it is clearly disclosed to consumers.

Credit card acceptance fees, also known as “swipe fees,” cost U.S. merchants approximately $35 billion each year. Merchants pay swipe fees each time a consumer uses a credit card to make a purchase. American Express has the highest swipe fees of any credit card network, charging merchants 3% on some transactions. Merchants pass on these billions of dollars in fees to consumers through higher retail prices. Vermont’s existing law and the amended complaint filed yesterday seek to remedy the credit card companies’ practice of suppressing competition by forbidding merchants from rewarding consumers who use less expensive credit cards or cash. Allowing merchants to do this should foster competition among credit card companies by encouraging them to lower fees.

The settlement is subject to the provisions of the federal Tunney Act, which requires that the U.S. DOJ accept public comments during a 60-day period. The court will then review and determine whether to enter the proposed consent decree.

  Website consulting provided by The National Association of Attorneys General.