Ohio v. American Express: Supreme Court rules in favor of Amex in antitrust case

Last Updated Jun 25, 2018 12:26 PM EDT

WASHINGTON —The Supreme Court handed American Express a win Monday in a lawsuit over rules it imposes on merchants who accept its cards.

Under their contracts, merchants who accept American Express generally can't encourage customers to use other credit cards, even though those cards may charge merchants lower fees. The federal government and a group of states sued over those so-called anti-steering provisions, arguing that they violate federal law.

But on Monday the high court ruled 5-4 in favor of American Express.

"In this case, we must decide whether Amex's antisteering provisions violate federal antitrust law. We conclude they do not," Justice Clarence Thomas wrote in an opinion for himself and his conservative colleagues, Chief Justice John Roberts and Justices Anthony Kennedy, Samuel Alito and Neil Gorsuch. 

American Express charges merchants higher fees than Visa and Mastercard because it relies heavily on spending rewards to retain members, the justices wrote. Higher "swipe fees" support the cost of those rewards. But higher fees alone don't make Amex anticompetitive, the majority wrote. "Amex's business model spurred Visa and MasterCard to offer new premium card categories with higher rewards. And it has increased the availability of card services, including free banking and card-payment services for low-income customers who otherwise would not be served," they wrote.

"If American Express had lost the case, the ramifications could've been enormous," said Matt Shulz, senior industry analyst for CreditCards.com, through a spokesperson. "Merchants would've been able to steer customers toward cards with lower swipe fees, meaning that AmEx would likely have needed to lower their swipe fees to remain competitive. The consumer likely would've felt that in the form of reduced card rewards from AmEx since swipe fees are the engine that powers those rewards."

However, the status quo has been preserved, meaning consumers are not likely to see any changes, Shulz added.

American Express cheered the ruling in a brief statement after it was announced. "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," the statement said.

Shares of American Express jumped 2.2 percent in early trading on Monday.

The case dates to 2010, when the Obama administration and more than a dozen states sued American Express along with Visa and MasterCard, which had similar anti-steering rules. Visa and MasterCard agreed to change their practices. American Express, which accounts for about a quarter of the credit card market, decided to go to trial.

A federal trial court judge initially ruled against American Express, finding that its rules stifled competition among credit card networks and led to higher fees for merchants and higher prices for consumers. An appeals court reversed the decision, ruling for American Express. The Supreme Court upheld that decision.