In a 5-4 decision, the U.S. Supreme Court ruled in favor of American Express over the fees charged to merchants for credit card transactions. Amex contracts that bar retailers from encouraging consumers to use cards with lower swipe fees are not anti-competitive conduct, according to the Court, because credit card networks create “two-sided platforms” that interact with both merchants and consumers.
Both Visa and Mastercard had accepted a Justice Department settlement in 2010 that removed such language from their merchant contracts, but American Express fought the case. After a three-judge panel of the U.S. Court of Appeals sided with American Express, in June 2017 11 states asked the Supreme Court to hear the case, saying it affected trillions of dollars in transactions. Among the four major credit card issuers, Amex charges the highest fees, Discover the lowest, with Visa and Mastercard in between.
“Today’s ruling is a blow to competition and transparency in the credit card market,” said Stephanie Martz, SVP and General Counsel of NRF said in a statement. “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.”
In a statement from RILA General Counsel and Retail Litigation Center President Deborah White, she said “Competition in the credit card space is sorely lacking. The Court’s decision to uphold the Second Circuit’s misguided approach will allow Amex to continue to stifle competition and prevent consumers from understanding the cost of rising credit card fees.”
In a dissent that he read from the bench, Justice Stephen Breyer noted that two-sided transactions were commonplace, according to The New York Times: “What about travel agents that connect airlines and passengers?” Breyer asked. “What about internet retailers, who, in addition to selling their own goods, allow (for a fee) other goods-producers to sell over their networks?
“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,” Breyer added.
The Court’s conservative justices, Chief Justice John Roberts and Justices Anthony Kennedy, Samuel Alito and Neil Gorsuch were in the majority. Justices Elena Kagan, Ruth Bader Ginsburg and Sonia Sotomayor joined Breyer in dissent.
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