The US Supreme Court has ruled in favour of American Express (AmEx) saying that the company’s policy of forbidding merchants from steering customers to use other credit cards with lower fees does not violate federal antitrust law.
The lawsuit filed by 11 US states (plaintiffs) accused that AmEx’s higher merchant fee, compared to competitors such as Visa and Mastercard, and its anti-steering policy led to high retail prices and affected customers.
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AmEx’s business model is based on cardholder spending and is said to require continual investment into its card rewards programme to retain customer loyalty. These investments are funded by charging merchants higher fees than other companies.
According to AmEx, sometimes merchants try to discourage customers from using its cards at point-of-sale (PoS) in order to avoid higher charges. To prevent such practices, AmEx’s contracts with merchants include anti-steering provisions.
The lawsuit alleged that these provisions violate the Sherman Antitrust Act.
However, the court said that credit card market should be considered with separate platforms for merchants and cardholders. It noted that the argument focuses on only one side of the market and concluded that the provisions do not violate the act.
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By GlobalDataThe court added that the plaintiffs failed to prove if AmEx’s anti-steering policy increased the credit card transactions cost above a competitive level, decreased the number of transactions or stifled competition.
Commenting on the ruling, AmEx chairman and CEO Stephen Squeri said: “This was a long battle, but well worth the fight because important issues were at stake: consumer choice, fair market competition, and the ability to deliver innovative products and services to our customers, both consumers and merchants.”
Meanwhile, the National Retail Federation said that the court’s decision will ‘perpetuate’ an approach that costs merchants and consumers billions of dollars annually.
