American Express Loses Bid to Dismiss Lawsuit Over Foreign-Exchange Fees
American Express Co., the world’s biggest credit-card issuer by purchases, must face a class- action lawsuit accusing it of conspiring to fix foreign currency conversion fees.
U.S. District Judge William Pauley in New York today rejected a bid by AmEx to dismiss the group lawsuit originally filed in 2004. He said AmEx had failed to provide documentation to support its defense.
“That Amex cannot pinpoint the precise date of its decision to implement a foreign exchange fee is arresting,” Pauley said in his ruling. “The lack of internal company documentation raises suspicion.”
The plaintiffs, holders of Visa or MasterCard credit cards issued by more than a dozen banks including Citigroup Inc. (C) and Bank of America Corp. (BAC), allege that AmEx engaged in a price- fixing conspiracy with banks and also conspired to include compulsory arbitration clauses in cardholder agreements.
The plaintiffs said the price-fixing scheme began when AmEx met with representatives of other banks in May 1999, Pauley said in his decision. After the meeting, Amex raised its foreign exchange conversion fee to 2 percent from 1 percent, and some other banks also raised their fees, according to the ruling.
AmEx argued there was no evidence that the fee increases resulted from a conspiracy involving the New York-based company, according to the ruling. AmEx also said the plaintiffs lacked standing under the arbitration clause to bring a conspiracy claim because they couldn’t demonstrate a “threatened loss.”
While “the plaintiffs are not AmEx cardholders, they nevertheless suffered reduced choice in the marketplace as a result of AmEx’s alleged collusion with the banks,” Pauley said in his ruling.
“A jury could find that AmEx’s conduct caused injury to competition in the credit card market,” the judge said.
“We are disappointed by the court’s decision,” Joanna Lambert, an AmEx spokeswoman, said in an e-mailed statement. “While we don’t comment on the specifics of pending litigation, we do note that the judge’s decision makes no findings other than the plaintiff may proceed with its case. We intend to continue to vigorously defend the case.”
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