Supreme Court rules for American Express in credit-card case

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By JESSICA GRESKO
Associated Press

WASHINGTON (AP) — The Supreme Court handed American Express a victory on Monday in a lawsuit over rules it imposes on merchants who accept its cards.

Merchants who accept American Express are generally contractually forbidden to encourage customers to use other credit cards. That’s true even though Visa and MasterCard generally charge merchants lower fees.

Likely to fend off competition, American Express generally prevents merchants who accept its card from offering customers discounts or other incentives to use other cards or to express a preference for other cards. The federal government and a group of states sued over American Express’ so-called anti-steering provisions, arguing that they violate federal law.

American Express has defended its practices. The Supreme Court noted that the company has long charged higher fees to merchants than those charged by its competitors. In return for the higher charges, American Express more or less promises to bring sellers wealthier shoppers, who spend more money. American Express also uses its higher merchant fees to offer its cardholders better rewards.

The high court ruled 5-4  on Monday in favor of American Express, allowing it to continue to bar merchants from steering customers to cards with lower fees.

“In this case, we must decide whether Amex’s antisteering provisions violate federal antitrust law. We conclude they do not,” Justice Clarence Thomas wrote in an opinion for himself and his conservative colleagues, Chief Justice John Roberts and Justices Anthony Kennedy, Samuel Alito and Neil Gorsuch. Thomas said “Amex’s business model has spurred robust interbrand competition and increased the quality and quantity of credit-card transactions.”

American Express cheered the ruling in a brief statement.

“The Supreme Court’s decision is a major victory for consumers and for American Express. It will help to promote competition and innovation in the payments industry,” the statement said.

Justice Stephen Breyer, who used to teach antitrust law at Harvard University, wrote a dissenting opinion for himself and three liberal colleagues, Justices Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan. Breyer, who took the unusual step of reading a summary of his dissent from the bench, said the court’s decision was “contrary to basic principles of antitrust law.”

The retail industry also expressed displeasure with the ruling. “Today’s ruling is a blow to competition and transparency in the credit card market,” said Stephanie Marz, general counsel for the National Retail Federation, said in a statement. “The American Express rules in question have amounted to a gag order on retailers’ ability to educate their customers on how high swipe fees drive up the price of merchandise.”

The case the Supreme Court ruled on dates to 2010, when the Obama administration and more than a dozen states sued American Express along with Visa and MasterCard, which had similar antisteering rules. Visa and MasterCard agreed to change their practices. American Express decided to go to trial. The company accounts for about a quarter of the credit card market in the United States as measured by transactions and has about 50 million cards in circulation in the United States.

A federal trial-court judge initially ruled against American Express. Looking at the effect of American Express’ rules on merchants, it found that the rules stifled competition among credit card companies and led to higher fees for merchants and higher prices for consumers. An appeals court reversed the decision, ruling for American Express.

It said that the effect of the rules on both merchants and cardholders should be considered. The Supreme Court agreed and found that American Express’ anti-steering provisions “do not unreasonably restrain trade.”