NEW YORK CITY (dpa-AFX) - American Express did not violate antitrust laws and can prohibit merchants from steering customers to credit cards with lower transaction fees, a federal appeals court ruled Monday.
This ruling reverses an earlier trial court's judgment against the company and directs that court to enter judgment in favor of American Express.
Circuit Judge Richard Wesley said in a written opinion, 'Though merchants may desire lower fees, those fees are necessary to maintaining cardholder satisfaction.'
'If a particular merchant finds that the cost of AmEx fees outweighs the benefit it gains by accepting AmEx cards, then the merchant can choose to not accept AmEx cards. Indeed, many merchants have already made and continue to make this choice,' the panel said.
The lawsuit was on the fees merchants pay to process credit and debit card transactions. Such fees are largely unknown to the average consumer, but are a major cost for merchants who accept credit cards.
The decision by the 2nd Circuit Court of Appeals in Manhattan is said to be a blow to businesses trying to reduce annual card fees that run around $50 billion.
The lawsuit was brought in 2010 by the U.S. Justice Department and 17 states against American Express, Visa and MasterCard. The lawsuit said that allowing merchants steer customers to cards with lower fees for merchants or to other preferred cards would benefit consumers and increase incentives for networks to reduce card fees.
In 2011, Visa and MasterCard entered into consent judgments and stopped their anti-steering rules for merchants. Meanwhile, American Express proceeded to trial. The company argued that its rules promote competition by allowing it to remain in the market with its rivals. The company noted that the higher fees it charges allows it to deliver more expensive benefits to its cardholders.
The Appeals court noted that a Brooklyn judge's February 2015 decision focused entirely on the interests of merchants rather than cardholders.
The court said the government had failed to prove that American Express' practice harmed customers and ordered the lower court to rule in favor of the company.
The ruling said that American Express seemed to get its market share based on its rewards programs and that there is no reason to intervene and disturb the present functioning of the payment-card industry.
Copyright RTT News/dpa-AFX