Connecticut Attorney General's Office

Press Release

October 4, 2010

            Attorney General Richard Blumenthal joined the federal government in a lawsuit today against American Express, Visa and MasterCard concerning restraints they impose that block merchants from alerting their consumers about cheaper payment methods such as cash or credit cards that offer lower transaction fees to businesses.

            In 2009 alone, these card companies collected more than $35 billion in fees from merchants, significantly draining American businesses that are forced to pass on these costs through higher retail prices.

These three companies -- together controlling 94 percent of the credit card transaction volume in the country -- impose fees on merchants every time a consumer uses these credit or charge cards. American Express charges as much as 3 percent to businesses for some transactions.

Over the last several years, the credit and charge card companies have continued to increase these fees even though their own administrative costs for these transactions have decreased.

While some credit card companies offer more affordable fees, the card networks have prohibited merchants from steering customers to more affordable cards or to cash. Merchants are even prohibited from informing customers of the cost to the merchant flowing from the different payment methods. Most consumers are unaware of these cost burdens paid by merchants in order to accept credit cards, particularly American Express and rewards cards, or how these costs are included in the customer’s purchase price.

            Both Visa and MasterCard are agreeing -- simultaneously with the filing of today’s lawsuit -- to discontinue these practices. The lawsuit will proceed against American Express, which is so far maintaining these restraints.

“Our action seeks to bolster small businesses against the oppressive power of giant card companies,” Blumenthal said. “These card companies have muzzled merchants, silencing them from steering consumers to more affordable card options or cash. These card company practices have swiped billions from merchants every year -- driving up costs.

“I am hopeful that today’s action will be a pivotal moment -- sparking competitive pricing among the major card companies, shedding light on unacceptable fees and ultimately shaving down costs of doing business.

“Visa and MasterCard have immediately agreed to do the right thing today, hopefully setting an example for American Express or others that continue to straitjacket small businesses into paying higher fees.”

Blumenthal said that some of the goals of today’s action include allowing merchants to advise customers what payment options may be cheaper -- without requiring consumers to use such payment methods. Over time, if consumers are inclined to use cheaper payment options, the costs of doing business will decrease and those savings may be passed on to consumers.

Blumenthal thanked members of his office who worked on the investigation -- Assistant Attorneys General Rachel Davis and Gary Becker, under the direction of Assistant Attorney General Michael Cole, Chief of the Attorney General’s Antitrust Department.