US: SCOTUS to hear AmEx antitrust case

The US Supreme Court on Monday, October 16, agreed to decide whether American Express is violating federal antitrust law by forbidding merchants that accept its credit cards from encouraging customers to use rival cards that charge lower fees.

The justices will hear an appeal by 11 states led by Ohio that sued American Express of a lower court ruling last year that endorsed the legality of the company’s “anti-steering” provisions in contracts with merchants.

Merchants annually pay more than US$50 billion in so-called swipe fees to process credit card transactions, and these fees can be passed along to customers through higher prices.

New York-based American Express charges merchants higher fees relative to the other credit card networks, and generates more revenue, according to the states’ legal papers. The company accounts for about 26% of all US credit card transactions.

As a result of advertising campaigns in the 1980s by competitors Visa and MasterCard, aimed at convincing merchants and consumers to use cards with cheaper fees, American Express tightened contract provisions with merchants to stop what it called discrimination against its cards.

The company said in a court filing that lower fees paid by merchants would mean fewer benefits for cardholders.

The Obama administration and 17 US states sued American Express in 2010 alleging that the company’s anti-steering contract requirement obstructs merchants from using competition to try to keep credit card fees from increasing.

A trial court agreed, finding that the rules kept lower cost networks out of the field and led to higher prices for merchants and consumers. In September 2016, the 2nd US Circuit Court of Appeals in New York overturned that ruling.

Full Content: Wall Street Journal

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