DoJ, Merchant Group Hail Judge’s Ruling Against AmEx Anti-Steering Rules

By Jim Daly

The U.S. Department of Justice and a merchant group focused on payment card acceptance costs Thursday afternoon hailed a federal district judge’s ruling striking down American Express Co.’s rules banning its merchants from steering AmEx cardholders to lower-cost forms of payment. Earlier in the day, New York City-based AmEx vowed to appeal the decision by Judge Nicholas G. Garaufis of U.S. District Court in Brooklyn, N.Y.

“Merchants pay over $50 billion in credit card swipe fees each year,” Leslie C. Overton, deputy assistant attorney general in the DoJ’s Antitrust Division, said in a statement. “The department and the attorneys general of 17 states brought this case because competition over those fees was being suppressed. The court’s ruling establishes that the American Express anti-steering rules block merchants from using competition to keep credit card swipe fees down, which means higher costs to those merchants’ customers.”

A DoJ spokesperson said Attorney General Eric Holder might have a comment about the case later.

Meanwhile, the Merchants Payments Coalition, a lobbying group of retailers, restaurants and state trade groups with a collective 2.7 million stores, said Judge Garaufis, in ruling that AmEx’s rules were an unlawful restraint of trade, “got it exactly right that card networks charge merchants inflated prices that result in higher costs for consumers.”

“Today’s ruling is one step forward to bringing badly-needed competition and transparency to the entire credit card industry,” the MPC said in a statement. “Allowing retailers to ask consumers to use a less expensive card will result in lower prices for consumers and a fairer market for the fees merchants currently pay to accept credit and debit cards.”

Garaufis’s 150-page ruling arose from a case the DoJ and states filed against Visa Inc., MasterCard Inc. and AmEx in late 2010. The suit alleged that the card networks’ rules banning their merchants from asking customers to present lower-cost forms of payment restrained trade in violation of the federal Sherman Act. Visa and MasterCard settled immediately and agreed to change their rules, but AmEx, citing its smaller market share than the bank card networks, vowed to fight in court. The case went to trial last summer.

Garaufis said he would schedule a hearing for legal remedies at a later date.