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American Express Co. disclosed today that its merchant pricing and "anti-steering" policies have kindled a governmental antitrust investigation. The New York credit card company said in a regulatory filing that it no longer expects to "meet its on-average and over-time financial targets," according to CardLine sister publication American Banker. AmEx said in the filing that the Justice Department's antitrust division has demanded information and documents about its "policies relating to merchant surcharging and its 'anti-steering' policies," which prohibit merchants from charging customers extra fees for paying with AmEx cards or for encouraging them to pay with other cards. The policies spurred three large drug companies to file lawsuits against AmEx in June, alleging that provisions in their agreements with AmEx violate antitrust laws by restraining them from steering customers to other payment cards, which often carry lower merchant discount rates. But today, both AmEx and a lawyer representing one of the drugstore plaintiffs said that the government investigation was not directly related to the lawsuits. Paul E. Slater, a partner at the Chicago firm Sperling & Slater PC, who represents CVS Caremark Corp. in its lawsuit against AmEx, said, "The merchants I represent are very unhappy with the fees they pay to AmEx, but to the best of my knowledge, we did not start the DOJ investigation." Joanna Lambert, an AmEx spokesperson, wrote in an e-mail that "the two are not related." Representatives for the Justice Department did not immediately respond to requests for information. But Thomas Brown, a partner in the San Francisco office of O'Melveny & Myers LLP, says the lawsuits probably were indirectly responsible for the government's interest. Even if "this investigation does not relate directly to the lawsuits by CVS and others," it has raised "the general interest in the subject matter" of networks' merchant-pricing and steering policies. Slater, who also is a professor of antitrust law at Northwestern University and is representing grocery-store chains that have filed similar lawsuits against Visa Inc. and MasterCard Worldwide, says it was "a little unusual for the Department of Justice to be investigating a vertical agreement" between a network and merchants. The government sent its request on Oct. 10 in the form of a civil investigative demand, or CID, which AmEx called "a request for information in the course of a civil investigation and does not constitute the commencement of legal proceedings." Brown agrees that such a request might not lead to more government action. "Often those CIDs are resolved without any change in a particular practice or without a lawsuit," he says. Lambert wrote that the anti-steering and merchant-surcharging policies under investigation "are both long-standing policies included in our merchant contracts to ensure our cardmembers have a positive experience at the point of sale. We're confident in our policies and practices and are cooperating with the request for information."
