Appeals Court Tosses Antitrust Judgment Against American Express -- Update

By Christopher M. Matthews and Robin Sidel 

A federal appeals court tossed an antitrust judgment against American Express Co. Monday, ruling the credit card company can bar merchants from steering customers toward using other credit cards with lower fees.

The ruling is a significant win for AmEx, which had appealed a 2015 judgment by a Brooklyn U.S. district judge who found anti-competitive AmEx's policy of not allowing its merchants to promote other cards.

Last year's ruling, by U.S. District Judge Nicholas Garaufis, meant that merchants who accept AmEx would be permitted to encourage customers to use other, potentially cheaper cards, such as ones that are branded by Visa Inc. and MasterCard Inc. Merchants also could offer discounts to shoppers for using cards other than AmEx and post signs that specify which card they prefer.

But the Second U.S. Circuit Court of Appeals said Monday that the Justice Department didn't prove AmEx agreements with merchants hurt consumers, including both cardholders and merchants, and the lower court erroneously focused solely on the damage to merchants.

"This approach does not advance overall consumer satisfaction," the three judge panel wrote in a 66-page opinion. "Though merchants may desire lower fees, those fees are necessary to maintaining cardholder satisfaction -- and 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."

In a statement, AmEx said that the company "is pleased with the Appellate Court's decision to uphold the Non-Discrimination Provisions in our merchant contracts," adding that the ruling "means consumers will be able to choose how they pay and our Card Members will not be discriminated against at the point of sale."

A Justice Department spokesman declined to comment.

Write to Christopher M. Matthews at [e-mail] and Robin Sidel at [e-mail]

(END) Dow Jones Newswires

September 26, 2016 17:41 ET (21:41 GMT)

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