Amex has won an eight-year antitrust lawsuit over interchange fees. The Supreme Court ruling at the end of June found that the card company’s ‘anti-steering’ rules did not violate federal antitrust law. The rules prevent merchants from encouraging customers to use cards with lower interchange fees, such as Visa or Mastercard.
Amex has historically charged higher fees to merchants than competitors as it delivers wealthier cardholders who spend more, the Supreme Court said. The fees that merchants pay to process Amex transactions fund the card company’s generous rewards programmes. “Amex’s business model has spurred robust interbrand competition and has increased the quality and quantity of credit card transactions,” wrote Justice Clarence Thomas in the 5-4 ruling.
In a statement, Stephen Squeri, chairman and CEO of American Express said: “This was a long battle, but 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.”
National Retail Federation
The National Retail Federation (NRF), the Washington-based retail trade association, slammed the ruling as “a missed opportunity”. Interchange fees total around $70 billion a year, it says.
“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 to protect its business model,” said Stephanie Martz, general counsel, NRF.
Credit card networks create two-sided platforms. They are best understood as supplying only one product — the transaction — that is jointly consumed by the cardholder and the merchant, wrote Justice Thomas for the majority. Accordingly the two-sided market for credit card transactions should be analysed as a whole.
The ruling has implications for other two-sided platforms, which link buyers and sellers, most notably internet platforms such as Google and Amazon. Justice Stephen G. Breyer read his dissent from the bench, a rare move indicating profound disagreement.
“I particularly fear the interpretive impact of the majority’s discussion of what it calls ‘two-sided platforms,’ in an era when that term might be thought to apply to many internet-related goods and services that are becoming ever more important,” he said.