American Express Merchant Fee Case Going to the Supreme Court

The U.S. Supreme Court accepted a case that could roil the credit card business, agreeing Monday to consider reviving government allegations that American Express Co. thwarts competition by prohibiting merchants from steering customers to cards with lower fees. A federal appeals court had thrown out the lawsuit, saying the U.S. government and 11 states failed to prove that the American Express rules harmed cardholders as well as merchants. The Supreme Court’s decision to take the case offers new hope to retailers trying to reduce the $50 billion in fees they pay to credit card companies each year. The justices will hear arguments early next year and rule by June.

Total Retail's Take: The implications of this case are immense for retailers, as they seek to lower the amount they pay in fees to credit card providers. Antitrust enforcers accused American Express of using its leverage over merchants to thwart competition from cards that would charge retailers lower fees. American Express’s agreements with retailers contain an "anti-steering" provision that bars them from doing anything to encourage the use of competing cards, such as offering discounts. Retailers are in a position where they need to offer consumers multiple payment options in order to secure their purchases, but as a result of doing so are having to pay expensive merchant fees to the credit card companies. A Supreme Court ruling in retailers favor would create more competition among credit card companies, and likely a lowering of fees as credit card companies battle for merchant accounts.