Magazine article American Banker

In This Case Target Is AMEX Honor-All Rule

Magazine article American Banker

In This Case Target Is AMEX Honor-All Rule

Article excerpt

A class action inspired by the Wal-Mart decision says American Express Co.'s requirement that merchants accepting its corporate charge cards also accept its consumer credit cards is illegal.

Merchants pay more to accept Amex cards than those of MasterCard International and Visa U.S.A.

In the suit initiated by Wal-Mart Stores Inc., retailers accused Visa and MasterCard of illegally tying debit card to credit card acceptance. This spring the associations settled for $3 billion and agreed to end their "honor all cards" rules. Amex has been considered a beneficiary of that outcome.

Spokesman Robert Glick acknowledged Friday that Amex "has the equivalent of an 'honor all cards' rule that means merchants who accept American Express are required to take all Amex-branded cards."

However, he added, "it's important to recognize that ... the Wal-Mart penalty was based on the finding of market power -- and that unlike Visa or MasterCard, American Express clearly does not have market power." He declined to discuss the matter further, saying that is company policy on pending litigation.

The new lawsuit complains that Amex uses its dominance of the charge card market to make merchants accept its credit cards, which include Blue and Optima.

The suit, which consolidates several similar ones, was filed Friday as a class action in the U.S. District Court of the Northern District of California.

Gary B. Friedman, a lawyer for the Amex plaintiffs, said their suit bears only "a surface resemblance" to the Wal-Mart suit but was inspired by the April 1 summary judgment in that case.

The Wal-Mart judge, John Gleeson of the U.S. District Court for the Eastern District of New York, said the general-purpose credit card market seems, as the retailers argued, to exclude charge cards.

"I had been thinking about this case before that decision," Mr. …

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