US didn't prove AmEx merchant policies violated antitrust law, 2nd Circuit says
The federal government failed to prove that American Express violated antitrust law with policies that stopped merchants from encouraging customers to use other, lower cost credit cards, a federal appeals court has ruled.
The New York-based 2nd U.S. Circuit Court of Appeals ruled on Monday, report Law.com (sub. req.), the New York Times and the Wall Street Journal (sub. req.). How Appealing links to the opinion (PDF) and additional coverage.
The Times calls the ruling “a major victory for American Express, which wants to ensure that its customers, who pay higher-than-average membership fees, do not encounter any barriers to use.”
The court ruled in a 2010 suit by the U.S. Justice Department and 17 states. Visa and MasterCard were also sued, but they settled by agreeing to end their anti-steering policies.
Judge Richard Wesley wrote the opinion. Wesley said a federal judge who found an AmEx antitrust violation had elevated the interests of merchants above those of cardholders, whose AmEx benefits are funded with higher merchant fees. The government had the burden of proving the AmEx policy harmed both cardholders and merchants, and it failed to carry that burden, the 2nd Circuit said.
“A reduction in revenue that AmEx earns from merchant fees,” Wesley wrote, “may decrease the optimal level of cardholder benefits, which in turn may reduce the intensity of competition among payment-card networks on the cardholder side of the market.”
