Swordsmyth
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The U.S. Supreme Court on Monday sided with American Express Co and against 11 states, ruling that the company's policy of forbidding merchants from encouraging customers to use rival credit cards with lower fees does not violate federal antitrust law.Handing American Express an important legal victory that validated a key component of its business model, the justices upheld a lower court decision that had cleared the company of unlawfully stifling competition through so-called anti-steering provisions in its contracts with merchants.
The decision was 5-4, with the court's conservative justices in the majority and liberals dissenting. Major retailers panned it as bad for consumers.
Shares of American Express were up 2 percent after the ruling in midday trading. Shares of rivals Visa Inc and Mastercard Inc both fell, with Visa down 2.6 percent and Mastercard off 2.5 percent.
So-called swipe fees paid to credit card companies each time a consumer uses a card for a purchase are a major expense for merchants who annually pay more than $50 billion to process such transactions.
The business model of American Express depends primarily on merchant fees, while competitors like Visa and MasterCard derive most of their revenues from interest on unpaid balances. American Express has said these fees fund the additional benefits it offers its cardholders compared to its rivals.
New York-based American Express charges merchants higher fees relative to the other credit card networks, and generates more revenue, according to legal papers filed by the states.
The case involved an appeal by the 11 states - Iowa, Connecticut, Idaho, Illinois, Maryland, Michigan, Montana, Ohio, Rhode Island, Utah and Vermont - of a 2016 ruling by the New York-based 2nd U.S. Circuit Court of Appeals that favored American Express.
The states, backed by President Donald Trump's administration, had argued that anti-steering provisions kept fees artificially high, leading to higher retail prices even for people who do not use credit cards.
More at: https://finance.yahoo.com/news/u-su...n-express-merchant-fee-142448010--sector.html
The decision was 5-4, with the court's conservative justices in the majority and liberals dissenting. Major retailers panned it as bad for consumers.
Shares of American Express were up 2 percent after the ruling in midday trading. Shares of rivals Visa Inc and Mastercard Inc both fell, with Visa down 2.6 percent and Mastercard off 2.5 percent.
So-called swipe fees paid to credit card companies each time a consumer uses a card for a purchase are a major expense for merchants who annually pay more than $50 billion to process such transactions.
The business model of American Express depends primarily on merchant fees, while competitors like Visa and MasterCard derive most of their revenues from interest on unpaid balances. American Express has said these fees fund the additional benefits it offers its cardholders compared to its rivals.
New York-based American Express charges merchants higher fees relative to the other credit card networks, and generates more revenue, according to legal papers filed by the states.
The case involved an appeal by the 11 states - Iowa, Connecticut, Idaho, Illinois, Maryland, Michigan, Montana, Ohio, Rhode Island, Utah and Vermont - of a 2016 ruling by the New York-based 2nd U.S. Circuit Court of Appeals that favored American Express.
The states, backed by President Donald Trump's administration, had argued that anti-steering provisions kept fees artificially high, leading to higher retail prices even for people who do not use credit cards.
More at: https://finance.yahoo.com/news/u-su...n-express-merchant-fee-142448010--sector.html
