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. Friedman said Friday in an interview, "but when Judge Gleeson wrote that, it took my thinking to another level."
Mr. Friedman called Judge Gleeson's comment "a lovely arrow in our quiver" but said evidence clearly shows that corporate charge cards and consumer credit cards are different products.
His clients complain that Amex's justification for its above-average merchant discount rate applies only to corporate charge cards and not to revolving consumer credit cards. Travel and entertainment cards issued to employees of Fortune 500 companies might bring in a high grade of spenders to retailers, but Optima and Blue cards do not, the plaintiffs argue.
They further contend that the New York company's "bank strategy" - its longtime goal of signing up banks to issue American Express cards - is based on the illegal tie. Amex has found partner banks only abroad, but it is expected to have better luck in the United States if the court decision in the Justice Department's case against Visa and MasterCard withstands appeals.
Mr. Friedman said fallout from the Wal-Mart case and the potential opportunity from the Justice Department suit mean that "American Express is free to approach banks with an irresistible proposition." The company's line, according to Mr. Friedman: "'Slap our logo onto your [consumer credit] cards and we can promise you universal acceptance, because merchants aren't allowed to opt out without losing all the business that our Fortune-500-issued corporate cards give them."
The draw for banks, he said, is the higher merchant rate they get to divvy up with Amex.
The plaintiffs also contend that Amex ties charge card acceptance to debit cards, which Amex says flatly that it does not issue.
