The U.S. government on Thursday (Nov. 10) requested a federal appeals court to reexamine a recent decision that lets American Express prevent merchants from encouraging customers to use credit cards outside of Amex that have lower fees associated with them.
According to a report by Reuters, the U.S. Department of Justice said in a filing that the appeals court was wrong in looking at how the policy impacted customers and merchants instead of looking at the impact to merchants only. What’s more, the Justice Department contends it shouldn’t have to show how the policy created more harm but that Amex should how it is promoting competition with its policy.
“It is not for Amex to decide on behalf of the entire market to eliminate merchant-side price competition, forcing all retail customers to subsidize rewards for Amex’s affluent cardholders,” the Justice Department said in the filing covered by Reuters. An Amex spokesman told Reuters the claim on the part of the government is without merit, and “if asked to do so by the court, we will oppose the DOJ’s petition vigorously.”
In late September, the 2nd U.S. Circuit Court of Appeal in New York overturned a lower court ruling that had erased Amex’s rules about so-called “antitrust steering.” The heart of the case centered on the greater than $50 billion that merchants pay Amex each year to process transactions. The customer in general see the fees, but merchants can pass them on in the form of higher prices. The appeals court ruled Amex can stop merchants who accept American Express from encouraging customers to use credit cards that don’t have as high fees.
Reuters noted the 2nd Circuit doesn’t grant many of the requests the Department of Justice is seeking and holds en banc hearings roughly once every other year.
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