Dec 2 (Reuters) - American Express ( AXP ) has failed to

persuade a federal judge in Rhode Island to block a proposed

class action accusing the financial industry giant of

overcharging thousands of merchants for credit and debit card

fees on consumer transactions.

U.S. District Judge Mary McElroy for now rejected arguments

by American Express ( AXP ) that the merchants should be forced to

pursue their claims individually rather than sue as a class.

Ten small merchants alleged in their lawsuit in March that

American Express ( AXP ) is violating U.S. antitrust law through its use

of "non-discrimination provisions" that prohibit businesses from

encouraging customers to use payment cards with lower

transaction fees.

American Express ( AXP ) did not immediately respond to a request

for comment on Monday.

Lawyers for the plaintiffs welcomed the ruling in a

statement. "The court's order means that these small businesses

will finally be able to have their day in court," the attorneys

said.

The merchants had valid arbitration agreements with American

Express ( AXP ), and more than 5,000 had sought to arbitrate their

claims against the company before the lawsuit was filed.

But American Express ( AXP ) balked at paying more than $17 million

in filing fees for the so-called mass arbitration, McElroy said,

and so an arbitrator closed the proceeding for the company's

nonpayment.

Responding to the lawsuit, American Express ( AXP ) urged McElroy to

strike the merchants' class action claims and also to compel the

allegations to be arbitrated.

"For over a decade, courts across this country - all the way

to the U.S. Supreme Court - have held that Amex's arbitration

provisions with merchants are valid and must be enforced," the

company argued.

American Express ( AXP ) in a court filing said the merchants

"engineered an administrative closure of their individual

arbitrations." It denied that it was refusing to pay filing

fees.

McElroy has not yet ruled on whether to certify the case as

a class action comprising as many as 5,155 merchants.

The merchants' lawsuit seeks a declaration from the judge

that American Express' ( AXP ) practices have violated federal antitrust

law. Such a ruling would let individual merchants pursue future

monetary damages claims.

The case is 5-Star General Store v. American Express Co ( AXP ),

U.S. District Court for the District of Rhode Island, No.

1:24-cv-00106.

For plaintiffs: Deepak Gupta of Gupta Wessler; Scott Harris

and Peggy Wedgworth of Milberg Coleman Phillips Bryson Grossman;

Tracey Kitzman of Song; and Robert Cohen of Law Offices of

Robert W. Cohen

For defendant: Peter Barbur and Kevin Orsini of Cravath,

Swaine & Moore

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