WASHINGTON (Reuters) - The U.S. Supreme Court on Monday sided with American Express Co (AXP.N), ruling that the company’s policy of forbidding merchants from encouraging customers to use rival credit cards with lower fees does not violate federal antitrust law.
Spurning a group of states that had sued American Express, the court upheld a lower court decision that had cleared the company of unlawfully stifling competition through so-called anti-steering provisions in its contracts with merchants. The decision was 5-4, with the court’s conservative justices in the majority.
American Express shares were up as much as 2.3 percent in Monday morning trading on the New York Stock Exchange.
The states, backed by President Donald Trump’s administration, had argued that anti-steering provisions kept fees artificially high, leading to higher retail prices even for people who do not use credit cards. So-called swipe fees paid to credit card companies each time a consumer uses a card for a purchase are a major expense for merchants who annually pay more than $50 billion to process such transactions.
New York-based American Express charges merchants higher fees relative to the other credit card networks, and generates more revenue, according to legal papers filed by the states.
The business model of American Express depends primarily on merchant fees, while rival companies derive most of their revenues from interest on unpaid balances. American Express has said these fees fund the additional benefits it offers its cardholders compared to competitors.
As a result of advertising campaigns in the 1980s by competitors Visa Inc (V.N) and MasterCard Inc (
