AmEx Can Prevent Retailers From Pushing Other Credit Cards

A federal appeals court ruled that American Express can forbid merchants from steering customers to cards with lower transaction fees.

September 28, 2016

NEW YORK CITY – This week, a federal appeals court ruled that American Express can stop retailers from pressing customers to use credit cards with lower transaction fees, the New York Times reports. The decision overturned a lower court’s ruling last year that such a prohibition breached federal antitrust law.

Now American Express can continue its practice of enforcing merchant contracts that forbid them from trying to get customers to use other payment forms. AmEx’s transaction fees have typically been much higher than MasterCard or Visa’s.

The original case was brought by the U.S. Department of Justice (DOJ) and 17 state attorneys general in 2010. In 2015, Judge Nicholas G. Garaufis of the United States District Court for the Eastern District of New York found that not allowing retailers to push customers to use other payment forms than American Express was “an unlawful restraint on trade.”

American Express took that decision to the U.S. Court of Appeals for the Second Circuit, which found that the lower court only considered the interest of retailers, “while discounting the interests of cardholders.” The three judges wrote that “though merchants may desire lower fees, those fees are necessary to maintaining cardholder satisfaction—and if a particular merchant finds that the cost of AmEx fees outweighs the benefit it gains by accepting AmEx cards, then the merchant can choose to not accept AmEx cards.”

The DOJ has yet to indicate whether it would appeal the ruling. American Express cards were used in around 26.4% of all U.S. credit card purchases in 2013, while Visa grabbed 45% and MasterCard 23.3%.

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