The U.S. Supreme Court on Monday handed American Express a big win — one that was met with disappointment from the nation’s leading retail associations.
Both the Retail Industry Leaders Association and the National Retail Federation criticized the high court’s decision to throw out a government lawsuit that accused American Express Co. of deterring competition by prohibiting merchants from steering customers to cards with lower fees.
In the 5-to-4 ruling, the court said that the credit card company’s rules regarding its services for merchants do not violate federal antitrust law. RILA called the decision “a loss for American consumers.”
“The Court’s decision to uphold the Second Circuit’s misguided approach will allow AmEx to continue to stifle competition and prevent consumers from understanding the cost of rising credit card fees,” said Deborah White, general counsel, RILA and president of the Retail Litigation Center.
The National Retail Federation also registered its displeasure with the ruling.
“Today’s ruling is a blow to competition and transparency in the credit card market,” said NRF senior VP and general counsel Stephanie Martz said. “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. By denying merchants the right to simply ask for another card or offer an incentive for using a preferred card, the Supreme Court has undermined the principle of free markets where one company should not be allowed to dictate the practices of an entire industry in order to protect its business model.”
American Express, Visa and MasterCard all used to have rules prohibiting merchants from encouraging customers to use lower-fee cards, but Visa and MasterCard dropped the restriction in a 2010 settlement with the Justice Department, according to the NRF. American Express refused to do the same, and was sued by the Justice Department.
A U.S. District Court judge ruled in 2015 that the American Express rules were a violation of federal antitrust law, but the credit-card company appealed and a three-judge panel of the 2nd U.S. Circuit Court of Appeals ruled in its favor in 2016. Eleven states that had joined the Justice Department lawsuit appealed to the Supreme Court, which last fall agreed to take the case.
NRF has argued in court that the American Express rules have helped the card company avoid pressure to reduce the fees it charges merchants and, in turn, has reduced incentives for Visa, MasterCard or Discover to do the same. In a friend-of-the-court brief filed late last year, NRF and other retail groups said the Amex rules “lead to increased prices for all consumers.”
For its part, American Express cheered the ruling in a statement after it was announced.
“The Supreme Court’s decision is a major victory for consumers and for American Express,” the company stated. “It will help to promote competition and innovation in the payments industry.”
