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Retailers Bemoan Supreme Court Ruling in AmEx Case

Court says credit-card company can bar retailers from incentivizing customers to use lower swipe-fee cards

WASHINGTON, D.C. -- The U.S. Supreme Court sided with American Express (AmEx) to prevent retailers from extending discounts or other offers to customers for using credit or debit cards with lower swipe fees.

The vote was split 5-4, with conservative justices siding with the majority. Justice Clarence Thomas wrote the majority opinion, which stated that the Department of Justice had not proven that the AmEx rules hurt consumers. Justice Stephen Breyer read sections of his dissent from the bench, which signifies intense disagreement with the ruling, according to The Wall Street Journal.

While the Dodd-Frank Act of 2010 capped debit-card swipe fees, the decision by the Supreme Court could make it more difficult for retailers to reign in credit-card interchange fees.

The ruling benefits AmEx in the short term, but Visa and Mastercard may also benefit in the long term, as the ruling supports the card companies’ high swipe fees in the United States.

The ruling allows AmEx to contractually prevents retailers from offering incentives for competing credit cards, so c-store operators can still offer deals and discounts for customers who use cash or a mobile platform that is not connected to a credit card, said Keefe, Bruyette & Woods analyst Sanjay Sakhrani to the Wall Street Journal.

Convenience-store industry and retailer associations blasted the decision.

“Today’s ruling is a blow to competition and transparency in the credit-card market,” said National Retail Federation Senior Vice President and General Counsel Stephanie Martz. “The American Express rules in question have amounted to a gag order on retailers’ ability to educate their customers on how high swipe fees drive up the price of merchandise.”

“The Supreme Court has given us a clarification of antitrust law as applied to American Express. Whether this approach will be applied to Visa and Mastercard remains to be seen, but whatever that decision is, merchants will be able to demonstrate that the major credit-card networks have violated the antitrust laws. The actions of the card networks are so far-reaching and abusive of both merchants and consumers that merchants will not have difficulty showing that the card networks have violated the antitrust laws in multiple ways. We look forward to demonstrating those violations of law in court,” said NACS Senior Vice President of Government Relations Lyle Beckwith.

Conversely, American Express celebrated the decision. “The Supreme Court’s decision is a major victory for consumers and for American Express. It will help to promote competition and innovation in the payments industry,” a company spokesman said.

The case was originally brought by a collection of state attorneys general and the Department of Justice in 2010. The Supreme Court agreed to hear the case after the U.S. Court of Appeals for the Second Circuit overturned a February 2015 district court decision finding that AmEx’s rules constitute an illegal restraint on trade.

Photo courtesy of Images Money. 

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