Amex on Interchange Settlement: Surcharging ‘Not Consumer Friendly’ 

July 19

During its second-quarter earnings call yesterday, American Express CFO Dan Henry weighed in on the highly publicized interchange settlement reached last week between U.S. merchants and Visa, MasterCard and many of the largest credit card issuers in the country. Henry notes in the Q&A with analysts that, compared to its competitors, American Express controls a far lower market share and it has been acknowledged by the courts that the New York City-based company simply does not have comparable market power, which the court said defendants wielded improperly. As for the settlement itself, Henry says American Express will keep an especially close eye on the provision allowing merchants to add a surcharge to credit-card purchases made with Visa or MasterCard.

“Surcharging is not consumer-friendly,” Henry says. “The terms and the conditions within the settlement agreement that deal with surcharging are very complicated. So given the complexity, we think it’s too early to know what impact the rule changes might actually have in the marketplace, but we obviously will monitor the situation and respond appropriately. The other thing I would point out, and you should keep in mind, is that in the United States, there are 10 states that have laws that prohibit surcharging and these states represent about 50 percent of our U.S. billing volume.”

Henry says surcharging has worked differently in the different international markets where it has been allowed. He notes that the settlement will not change any contracts between merchants and American Express and that the only concession the company requires of merchants is, if they are going to surcharge for Amex purchases, they must surcharge the same amount for credit cards from the other networks.