[JURIST] The US Department of Justice (DOJ) [official website] on Monday announced the filing of a civil antitrust lawsuit [press release] against credit card companies Visa, MasterCard and American Express [corporate websites]. The lawsuit, filed in the US District Court for the Eastern District of New York [official website], challenges rules utilized by the companies that prevent merchants from providing discounts and rewards for using credit cards with lower merchant fees. The DOJ contends that these rules unfairly inflate costs for both consumers and merchants. The DOJ also announced that Visa and MasterCard have agreed to a settlement that will require the companies to allow merchants using their cards to express a preference for types of payments accepted, to offer discounts to consumers for using a particular card or type of payment and to provide consumers with information regarding the costs incurred by the merchant when a particular type of credit card is used. Attorney General Eric Holder [official profile] noted the importance of the lawsuit [statement] in helping to curb the harmful practices:

[R]estrictive rules prevent price competition among credit card networks, which means merchants face increased business costs and consumers pay higher prices. With today’s lawsuit we are sending a clear message: we will not tolerate anticompetitive practices. We want to put more money in consumer’s pockets, and by eliminating credit card companies’ anticompetitive rules, we will accomplish that.

American Express has denied any wrongdoing [press release], and the company’s chairman noted that they have “no intention of settling the case.” American Express also indicated that they believe the lawsuit will ultimately limit consumer choice and actually decrease the competitive nature of the credit card industry. If the DOJ’s proposed settlement is approved, it will allow merchants accepting only Visa or MasterCard to take immediate advantage of the terms of the settlement.

The DOJ’s lawsuit is not the first effort by the Obama administration to protect consumers from the practices of the credit card industry. In May 2009, President Barack Obama signed [press release] the Credit Card Accountability Responsibility and Disclosure Act (CARD Act) [text, PDF] in order to protect “responsible credit card users.” Among the provisions included in the law, which went into full effect [press release] in August, are restrictions on retroactive interest rate increases, a mandatory 45-day notice for all proposed interest rate increases and a requirement that credit card companies mail a billing statement to the consumer 21 days before the bill due date. The measure passed both the House and Senate [JURIST reports] with strong bipartisan support.