Supreme Court Rules Against Retailers in Amex Credit Card Case

The Supreme Court handed American Express a win Monday in a lawsuit over rules it imposes on merchants that accept its cards. Under their contracts, merchants which accept American Express generally can’t encourage customers to use other credit cards, even though they charge merchants lower fees. The federal government and a group of states sued over those so-called “anti-steering” provisions, arguing that they violate federal law. But on Monday the high court ruled 5-4 in favor of American Express. A federal trial court judge initially ruled against American Express, finding that its rules stifled competition among credit card networks and led to higher fees for merchants and higher prices for consumers. An appeals court reversed the decision, ruling for American Express. The Supreme Court upheld that decision.

Total Retail's Take: Retailers have had a close eye on Washington in the past week, with the Supreme Court ruling on two cases that figure to have a significant impact on the future of their businesses. Last Thursday, the Supreme Court offered its decision in favor of South Dakota in a case against online retailer Wayfair, ruling that internet retailers can be required to collect sales taxes in states where they have no physical presence. The ruling was met with a mixed reaction from the retail industry, with traditional brick-and-mortar retailers, particularly enterprise brands, cheering the decision, while online pure-plays, catalogers and SMBs voiced their displeasure. And today, the Supreme Court ruled in favor of American Express and against merchants in a lawsuit over rules the credit card company imposes, specifically the ability for merchants to encourage customers to use other credit cards which charge lower processing fees than American Express.

While there was some debate on whether last week's ruling was a positive or negative for retailers, today's Supreme Court decision can only be looked at as a negative for merchants and, subsequently, consumers, who will likely bear the burden of higher process fees in the form of increased prices. Here's some reaction from the National Retail Federation (NRF) and Retail Industry Leaders Association (RILA), two of the industry's biggest trade associations:

“Today’s ruling is a blow to competition and transparency in the credit card market,” NRF Senior Vice President 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. This misguided decision represents a missed opportunity to take a stand in favor of free markets and bring soaring credit card fees under control.”

“Today’s decision is a loss for American consumers,” said Deborah White, RILA general counsel. “Competition in the credit card space is sorely lacking. 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."