U.S. District Court Rules That American Express Violated Antitrust Laws

(RTTNews) - A judge in the United States District Court in the Eastern District of New York ruled in favor of the U.S.s Justice Department's lawsuit claiming that American Express' rules for merchants violate antitrust laws.

The United States Department of Justice and 17 state attorneys general sued American Express (AXP), Visa Inc. (V) and MasterCard International Inc., in 2010 to eliminate restrictions that the three credit card networks imposed on merchants. Over the course of a seven week trial during the summer of 2014, the department argued that these restrictions obstruct merchants from using competition to try to keep credit card fees from increasing. The civil case sought to end the violation and to restore competition.

The Justice Department said that the trial focused on credit card "swipe fees" which generate over $50 billion annually for credit card networks. Millions of merchants of all sizes and in scores of industries pay those fees.

Despite these large fee revenues, the Justice Department argued that price competition over merchant swipe fees has been almost non-existent and for decades the credit card networks have not competed on price.

Settlements with Visa and MasterCard were filed at the same time the case against American Express was begun; the settlements prohibit the two networks from continuing their rules and practices that had obstructed competition. The court approved the settlements on July 20, 2011, and they applied immediately to Visa and MasterCard. American Express was not a party to the settlements, and the litigation against American Express continued.

Meanwhile, American Express said it is disappointed in the court's ruling, which it believes will harm competition to the detriment of consumers and merchants. The company intends to appeal the court's ruling at the appropriate time. It believes it should prevail on appeal.

"American Express' Non-Discrimination Provisions protect Card Members from anti-consumer practices, including at the checkout counter, such as being told to pay with another card. Eliminating these protections would inhibit consumers' choice to pay with their preferred payment method and allow merchants who have agreed to honor our cards to then discriminate against them when our Card Members choose to pay with American Express," American Express said.

"Today's decision would harm competition by further entrenching the two dominant payment networks, Visa and MasterCard. Only a small percentage of Visa and MasterCard holders carry American Express cards. By contrast, most American Express Card Members carry a competing card in their wallet. Today's decision means merchants would be able to steer customers to use Visa and MasterCard, while it would be virtually impossible to steer away from them," American Express said.