Federal court decision slams AmEx for action that hurts consumers
On behalf of The Rollins Law Firm posted in Debt Relief on Monday, February 23, 2015.
Say that you're a principal manager with a credit card issuer (a lofty and singular position, to be sure), being part of the management team that supports the business practice of preventing merchants who accept your cards from recommending other cards to consumers.
Although such a business strategy might simply sound like good business practice grounded in common sense from your perspective, American securities law takes a dim view of the practice.
American Express found that out earlier this month when a federal judge ruled a longstanding practice of the company violative of U.S. antitrust law. Specifically, the court ruled that AmEx's practice of forbidding merchants in its network from opining on other credit card choices to consumers was illegal.
Merchants have always wanted the opportunity to make customer recommendations, regardless of the credit cards they accept. This has been especially true regarding American Express cards, which carry a higher transaction fee than is the case with Visa and MasterCard. American Express has justified the higher rate by pointing to services it says are comparatively better. Merchants have countered that the lower fees charged by competitors would save them money, which could be passed along to consumers.
That rationale found a receptive audience in the federal court, which found that high credit card fees insulated from competition stifle a free market. Remedies will be announced at a later date.
Unsurprisingly, American Express vows to appeal, with a spokesperson stating that the court's ruling results in the "further entrenching" of Visa and MasterCard.
U.S. Attorney General Eric Holder lauded the result, saying that it "vindicates the promise of robust marketplaces that is enshrined in our antitrust laws."
Source: Reuters, "American Express card rules violated U.S. antitrust law," Jonathan Stempel, Feb. 19, 2015