AmEx can bar merchants from steering card customers elsewhere
By Jonathan Stempel
NEW YORK (Reuters) - A federal appeals court on Monday cleared the way for American Express Co (AXP.N: Quote) to block merchants that accept its cards from steering customers toward lower-cost cards from other issuers.
The 2nd U.S. Circuit Court of Appeals in New York said a lower court judge in Brooklyn erred in February 2015 in finding that American Express' "anti-steering" rules violated federal antitrust law.
Underlying the case were the fees that merchants pay to process transactions, which the U.S. government estimated at more than $50 billion a year, and which can be passed along to cardholders in the form of higher prices.
The lower court judge, Nicholas Garaufis, had found that non-discrimination provisions (NDPs) in American Express' merchant agreements, meant to dissuade customers from using cards from Visa and MasterCard, unreasonably restrained competition.
But the appeals court said Garaufis erred by focusing entirely on the interests of merchants rather than cardholders who might benefit from American Express rewards programs and perceived prestige.
"Though merchants may desire lower fees, those fees are necessary to maintaining cardholder satisfaction," Circuit Judge Richard Wesley wrote for a three-judge panel.
"So long as AmEx's market share is derived from cardholder satisfaction, there is no reason to intervene and disturb the present functioning of the payment-card industry," he added.
Shares of American Express, whose largest shareholder is billionaire Warren Buffett's Berkshire Hathaway Inc (BRKa.N: Quote), closed down 43 cents, or 0.7 percent, at $63.42. The shares had been down about 1.4 percent when the decision was issued. Continued...