U.S., Amex duel at antitrust trial over credit card fees

Mon Jul 7, 2014 3:18pm EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Andrew Longstreth

NEW YORK (Reuters) - American Express Co (AXP.N: Quote) has hindered price competition in the U.S. credit card market and prevented merchants and consumers from reaping cost savings, a lawyer for the U.S. government said on Monday during the first day of a trial in Brooklyn federal court.

In an antitrust lawsuit, the U.S. Justice Department and 17 states have accused Amex of blocking credit card companies from lowering processing fees and allowing businesses to pass on savings to consumers.

Every year, credit card companies charge merchants more than $50 billion to process consumer transactions, according to the government.

At issue in the bench trial, expected to last nine to 10 weeks, are rules Amex imposes on the millions of merchants that accept its cards barring them from offering incentives to customers to use less-expensive credit cards when making purchases.

"Amex doesn't want consumers to have simple, truthful information about how much their cards cost," Craig Conrath, an attorney for the Justice Department, said.

U.S. District Judge Nicholas Garaufis of Brooklyn, who is overseeing the trial and will determine the outcome, asked few questions on Monday and did not offer any clues on how he views the case.

The government's suit seeks an order allowing merchants that accept Amex to give consumers incentives to use less-expensive credit cards.

The stakes are high for Amex, which uses the processing fees it charges merchants to provide rewards to its cardholders. In securities filings, American Express has said that an adverse ruling "could have a material adverse effect" on its business.   Continued...

American Express and American Express corporate cards are pictured in Encinitas, California October 17, 2011.  REUTERS/Mike Blake