Supreme Court says American Express contract with merchants does not stifle credit-card competition

WASHINGTON – The Supreme Court's conservative justices on Monday turned down an antitrust lawsuit filed by federal and state governments against American Express, prompting a rare dissent from the bench.

The high court ruled that Amex has a right to block merchants from steering customers to other credit cards, such as MasterCard and Visa, that charge retailers lower fees. It said challengers failed to prove the practice had anti-competitive effects.

The case dates to 2010, when 11 states and the Obama administration sought to let merchants steer customers to lower-cost credit cards as a means of spurring competition. The original lawsuit included as defendants MasterCard and Visa, which later changed their steering practices.

The Trump administration did not change positions, as it has in several other cases, but it had urged the court not to take up the case. Instead, the justices agreed to hear it but wound up agreeing with the U.S. Court of Appeals for the Second Circuit, which ruled in favor of Amex in 2016.

The decision was written by Justice Clarence Thomas, who said American Express charges higher fees to merchants because of increases in the value of its services, such as a more robust rewards program that encourages higher spending by cardholders.

"Amex's business model has spurred robust inter-brand competition and has increased the quality and quantity of credit-card transactions," Thomas said.

The court also noted that Visa and MasterCard merchant fees have increased even where Amex is not accepted, which it said showed Amex was not responsible for ever-rising fees.

Justice Stephen Breyer dissented on behalf of the court's four liberals. From the bench, he said the agreement between Amex and merchants "stops price competition in its tracks."

"The antitrust laws play a central role in our economic free enterprise system. They insist upon a fair, competitive marketplace, thereby protecting our economy from monopoly and helping to assure our prosperity," Breyer said. "I fear that today's decision will weaken this protection by departing from basic, established antitrust principles."

Reaction was swift on both sides. American Express chairman Stephen Squeri said the eight-year effort had been "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."

The National Retail Federation said the court's ruling will perpetuate a system that costs merchants and consumers billions of dollars annually.

"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," senior vice president Stephanie Martz said. 

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