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US: AmEx argues high fees are crucial to competition

 |  July 29, 2014

American Express is defending its high interchange fees in court against claims by the US Department of Justice that those fees harm competition, according to reports.

AmEx president of the company’s US consumer services business Joshua Silverman testified in court this week to defend those high fees, arguing that they are crucial to the credit card company’s unique rewards program, which gives AmEx its competitive edge over rivals.

Being forced to lower those fees “would be disastrous, and we would have to rethink everything in our business model,” Silverman told US District Judge Nicholas Garaufis on Monday.

But the DOJ claims that those fees harm competition because they impose unfair rules on merchants that block those merchants from encouraging customers to use credit cards with lower swipe fees like Visa and MasterCard.

But American Express says that its top rivals Visa and MasterCard are too big to be harmed by AmEx’s merchant agreements. According to the company, Visa and MasterCard hold a combined 1 billion cards in the country; AmEx, in comparison, has about 55 million.

According to reports, the DOJ’s suit against AmEx is the first time a credit card company has faced trial on allegations that swipe-fee rules violate antitrust law.

Full content: Bloomberg

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