Author: Adam Liptak / Source: New York Times
WASHINGTON — American Express did not violate the antitrust laws by insisting in its contracts with merchants that they do nothing to encourage patrons to use other cards, the Supreme Court ruled on Monday.
The decision has implications not only for what one brief called “an astronomical number of retail transactions” but also for other kinds of markets, notably ones on the internet, in which services link consumers and businesses.
Such “two-sided platforms,” the court said, require special and seemingly more forgiving antitrust scrutiny.
The vote was 5 to 4, with the court’s more conservative members in the majority. Justice Clarence Thomas, writing for the majority, said the specialized nature of credit-card transactions justified what in other circumstances might have been anti-competitive conduct.
Retailers pay so-called swipe fees when customers use credit cards. American Express charges higher fees than Visa or Mastercard, meaning that merchants have good reason to prefer those other cards.
But credit card networks create “two-sided platforms,” Justice Thomas wrote, and they “differ from traditional markets in important ways.” Since card companies deal with both merchants and consumers, he wrote, people challenging actions as anticompetitive must take account of the effect on both sets of market participants.
Viewed that way, Justice Thomas wrote, American Express promoted competition by designing rewards programs to attract affluent customers.
“Amex’s business model sometimes causes friction with merchants,” he wrote. “To maintain the loyalty of its cardholders, Amex must continually invest in its rewards program. But, to fund those investments, Amex must charge merchants higher fees than its rivals.”
“Even though Amex’s investments benefit merchants by encouraging cardholders to spend more money, merchants would prefer not to pay the higher fees,” Justice Thomas wrote. “One way that merchants try to avoid them, while still enticing Amex’s cardholders to shop at their stores, is by dissuading cardholders from using Amex at the point of sale.”
The steering agreements were justified in these circumstances, Justice Thomas wrote.
“While these agreements have been in place,” Justice Thomas wrote, “the credit-card market experienced expanding output and improved quality. Amex’s business model spurred Visa and Mastercard to offer new premium card categories with higher rewards. And it has increased the availability of card services, including free banking and card-payment services for low-income customers who…
The post Supreme Court Sides With American Express on Merchant Fees appeared first on FeedBox.