SCOTUS ruling a win for consumers? AmEx, retailers disagree

It is no surprise that directly after the Supreme Court decided a Department of Justice antitrust lawsuit in favor of American Express Co., the company and retailer groups issued differing opinions on whether the ruling would be good for consumers.

Stephen J. Squeri, AmEx chairman and CEO, issued a statement praising the ruling. "The Court's decision is a major victory for consumers and for American Express," he stated. "This was a long battle, but well worth the fight because important issues were at stake: consumer choice, fair market competition, and the ability to deliver innovative products and services to our customers, both consumers and merchants."

Squeri highlighted SCOTUS' statement that the Amex's business model "has stimulated competitive innovations in the credit-card market, increasing the volume of transactions and improving the quality of the services."

Squeri added that since the case began eight years ago, the company has "significantly expanded the network of merchants who willingly accept American Express, and have seen merchant satisfaction steadily increase. We have also broadened the range of benefits, services and experiences that build loyalty with Card Members and make American Express their preferred payment method. We are generating strong momentum across American Express, and today's decision will help us use our differentiated business model to help merchants build their businesses and to provide competitive value to our Card Members."

Nay says NRF

The National Retail Federation expressed opposition to the court's decision, stating that AmEx rules that prevent retailers from encouraging the use of other credit cards with lower processing fees "will perpetuate a system that costs merchants and consumers billions of dollars a year."

NRF senior vice president and general counsel Stephanie Martz added, "Today's ruling is a blow to competition and transparency in the credit card market. 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."

What was at stake

When consumers use a credit card to make a purchase, merchants are charged a fee to process the transaction. The card brand rules have effectively forced retailers to build the fees into the price of merchandise, increasing costs for consumers by hundreds of dollars a year for the average family, according to the NRF. "The fees average about 2 percent of the transaction, but American Express has traditionally had higher fees, with Visa and MasterCard in the middle and Discover the lowest," the NRF wrote. "Amex, 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."

Amex was subsequently sued by the DOJ for not doing the same. "A U.S. District Court judge ruled in 2015 that the Amex rules were a violation of federal antitrust law, but Amex appealed and a three-judge panel of the 2nd U.S. Circuit Court of Appeals ruled in its favor in 2016," the NRF stated. "Eleven states that had joined the Justice Department lawsuit appealed to the Supreme Court, which agreed to take the case last fall."

RILA also not in favor

The Retail Industry Leaders Association was also disappointed with the ruling. "Today's decision is a loss for American consumers," said Deborah White, RILA general counsel and Retail Litigation Center president. "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.

"Nonetheless, RILA and the RLC are dedicated to increasing competition in the payments market and will continue our efforts to fight the card companies' anti-competitive rules on multiple fronts."

The RLC, along with groups representing a variety of retailers, filed an amicus brief in Ohio December of 2017. "The groups argued that Amex's restraint of trade caused price distortions that prevented competition, resulting in dramatically raised prices for merchants and consumers, erected barriers to market entry, and stifled innovation and that Amex's conduct distorts the competitive process," the RLC said.

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