American Express can prohibit merchants from steering customers to credit cards with lower transaction fees, a federal appeals court ruled in a case involving about $50 billion of merchant fees annually.
The ruling is a significant victory for American Express, with shares paring their decline on the news. The stock fell 0.6 percent to $63.50 at 3:05 p.m. in New York after dropping as much as 1.6 percent earlier.
"Though merchants may desire lower fees, those fees are necessary to maintaining cardholder satisfaction -- and if a particular merchant finds that the cost of Amex fees outweighs the benefit it gains by accepting Amex cards, then the merchant can choose to not accept Amex cards,” the appeals court said. “Indeed, many merchants have already made and continue to make this choice.”
The government failed to prove that American Express customers were harmed by the company’s practice and ordered the lower court to rule in favor of the company.
The case is U.S. v. American Express Co., 15-1672, Second U.S. Circuit Court of Appeals (Manhattan).
