Categories Finance

No antitrust violation by American Express, says SC

American Express (AXP) has won the lawsuit on credit card fees, with the Supreme Court declaring that the company’s anti-steering rules do not violate antitrust laws. Amex charges a higher swipe fee than its peers for merchants who allow payment through its cards, and the company believes this is necessary to maintain its high-rewards program. Amex also feels the high fees are justifiable thanks to its high income, heavy spending customer base.

Amex prohibits vendors from offering any perks to customers for using cards from rival companies that charge a lower swipe fee. This move was seen as harmful to consumers as vendors would pass on their excess costs to the customer. Amex, Visa (V) and Mastercard (MA) faced charges on grounds that their payment services terms left vendors with very less power for negotiations. Visa and Mastercard agreed to settlements, while Amex proceeded with litigation.

The court stated that the government had failed to show that the high swipe fees impacted customers along with merchants, while also ruling that Amex’s model had increased the quality of credit card transactions. In total, swipe fees bring in over $50 billion to credit card companies, which help run the rewards program.

Amex believes the decision will benefit competition and innovation in the payments sector

Those in support of retailers said the court decision was likely to harm competition and expose customers to high fees and costs. Amex is celebrating the decision, which it believes will benefit competition and innovation in the payments sector.

Another interesting point is that this decision is likely to spill over to other industries where companies serve two parties i.e. the customer and the third-party vendors providing products and services, or in the case of tech companies, advertisers. Companies like Amazon (AMZN), Google (GOOGL) and Facebook (FB) will be able to shield themselves from legal action unless it can be proved that both sides of the market will be affected by their actions. In such a scenario, it will be difficult for smaller firms and customers to raise concerns.

Amex, which accounts for over a quarter of all credit card transactions in the US, reported a 32% increase in global merchant services income for the first quarter of 2018 compared to last year. If Amex had lost the case, it would have impacted its credit card rewards program. However, despite all this, there are experts who believe this decision is not likely to cause much of a problem for customers and that it remains restricted between American Express and its vendors.

Most Popular

Here’s a look at Dollar Tree’s (DLTR) expectations for the remainder of the year

Shares of Dollar Tree Inc. (NASDAQ: DLTR) were down over 1% on Wednesday, a day after the company reported earnings results for the third quarter of 2022. Revenue and earnings

Target Corporation (TGT): A look at how the retail giant is shaping up against an inflationary backdrop

Shares of Target Corporation (NYSE: TGT) were up over 1% on Wednesday. The stock has dropped 30% year-to-date and 35% over the past 12 months. Last week the company reported

Is Zoom Video Communications (ZM) a good investment after Q3 earnings?

Zoom Video Communications (NASDAQ: ZM) expanded its customer base at an accelerated pace during the COVID crisis and soon became the preferred video conferencing platform for businesses and millions of


Add Comment
Viewing Highlight