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US: Credit cards under antitrust attack

 |  July 8, 2014

American Express slammed rivals Visa and MasterCard as a duopoly in court documents filed this week, say reports, as part of its defense in a lawsuit filed by the Department of Justice.

The remarks highlight the battle being fought by credit card giants in the US as they face legal action for antitrust claims. While AmEx is being sued over processing fees it charges to merchants, with the government claiming the company uses its market power to harm competition, Visa and MasterCard are also under legal fire in a separate lawsuit over patent infringement and market dominance claims.

The DOJ sues American Express

The DOJ’s lawsuit against AmEx kicked off this week, launching a case that has the potential to overhaul the nation’s credit card industry, say reports.

The DOJ argues that AmEx, which charges the highest processing fees of any credit card in the nation, is unfairly blocking merchants from using incentives to encourage customers to use cheaper cards or cash.

American Express, however, argues that it does not hold enough market share to create an anticompetitive effect on the industry. As part of its defense, AmEx reportedly argued that Visa and MasterCard hold a duopoly in the industry.

Credit card swipe fees were at the center of a major lawsuit filed by the DOJ against AmEx, MasterCard and Visa. The latter two eventually offered a record $5.7 billion settlement.

AmEx eventually offered its own form of a settlement by offering merchants to add a surcharge to purchases made with one of its cards, though required the same charge to be added to all transactions. This policy was dubbed the “take it or leave it” rule and has failed to appease regulatory concerns.

Visa, MasterCard sued

Meanwhile, Visa and MasterCard are also being sued, in this instance by SmartMetric, a technology firm that developed a fingerprint scanner into new EMV payment credit chip cards.

SmartMetric argues that Visa and MasterCard have infringed on its patents regarding the technology.

The company is seeking 25 percent of the economic value of savings from would-be fraud, in all a $13.4 billion value, SmartMetric claims.

At question in the case, say reports, is whether Visa and MasterCard control the actual credit cards used in the nation.

The credit card firms, however, say they do not control those cards.

The case is scheduled to be heard on August 8 in Washington, D.C.

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