The big antitrust ruling against American Express could set off a price war that squeezes all payment card networks — not just Amex — as well as card-issuing banks.

U.S. District Judge Nicholas Garaufis' decision that Amex's merchant contracts are illegal will force card companies to more aggressively compete on their interchange rates, which should benefit merchants, observers said. The judge struck down Amex's ban on a practice called "steering," in which merchants offer customers discounts or other perks for using cards that cost the merchants less to accept.

"The ruling shifts power from the networks to the merchants by permitting merchants to play networks off each other to bring down interchange rates," Guggenheim Securities analyst Jaret Seiberg wrote in a research note Thursday.

A price war could especially strain community banks and credit unions, if larger banks are able to reach agreements with retailers to steer customers toward their cards, Seiberg wrote.

Amex argued that its anti-steering requirement is crucial to keeping it strong and promoting competition.

In testimony at the trial this summer, Chief Executive Kenneth Chenault said Amex "will not survive as a company" if the provisions against offering discounts are removed. The company's stock lost almost 2% Thursday.

"We are disappointed with the decision and plan to file an appeal because we believe the decision was wrong," an Amex spokeswoman said in an email. "The court's ruling will not provide any benefit to consumers and will, in fact, harm competition by further entrenching the two dominant networks."

Amex's rates are generally higher than competitors like Visa and MasterCard, court documents said.

Its anti-steering provisions "have caused actual anti-competitive effects on inter-brand competition" leading to a "dramatic" rise in costs borne by merchants and their customers, Garaufis said in his 150-page ruling for the U.S. District Court in Brooklyn, N.Y.

Moreover, the provisions artificially inflate the price of interchange fees across the board, the judge said.

"The result is an absence of price competition among American Express and its rival networks," Garaufis wrote. The provisions "also have foreclosed the possibility of a current network or a new entrant to the market differentiating itself from its competitors by pursuing a lowest-cost provider strategy."

He gave Amex 30 days to work with the government to revise its merchant agreements so that they do not violate the law.

Amex may consider the ruling a win for its competitors, but getting rid of the anti-steering rules "will not help Visa and MasterCard," said Douglas Kantor, an attorney at Steptoe & Johnson who has represented payments networks.

"They love these pricing constraints," he said. "What merchants really want is competitive pricing, and that's the last thing that Visa and MasterCard want."

That outcome could be bad news for banks, too, which have historically been closely tied to Visa and MasterCard and receive a portion of the fees paid by merchants on credit cards they issue.

Visa and MasterCard were operated as associations of competitor banks until the mid-2000s. These bank associations forbid their members from issuing cards on the American Express or Discover networks until 2003, when a court ruled that was anti-competitive. But banks still do far more business with Visa and MasterCard than their competitors; bank-issued cards make up just 1% of Amex's annual charge volume, court documents show.

The Justice Department sued Amex, Visa and MasterCard over anti-steering provisions in 2010. The two larger networks settled with the government and agreed to cease the practices, without paying any fines. MasterCard declined to comment Thursday, and Visa did not respond to a request for comment.

Despite these settlements, the 98% of retailers that accept Amex cards remained forbidden from offering perks for cheaper networks. This effectively created a price floor for interchange rates, the judge's decision said.

Discover took an active part in the government's suit against Amex. Discover's chief operating officer and president, Roger Hochschild, testified in July on behalf of the government that anti-steering rules doomed the company's efforts to position itself as the low-cost credit card network in the 1990s as a way to win market share.

In an interview last month, however, Discover CEO David Nelms minimized the importance of the Amex suit.

"I don't think it would have a hugely significant impact one way or the other to our business," Nelms said. The company declined to comment on the verdict Thursday.

The coming years, and the result of Amex's planned appeal, will determine whether Nelms is right. In the interim, Garaufis' ruling is the most significant legal precedent yet establishing that rules against steering are an anti-competitive practice, Kantor said.

"For now, it's an extremely important legal principle and an important ruling to show that, in fact, these actions do constrain the market and hurt merchants and individuals," he said.

Kevin Wack contributed to this article.

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