AmEx Will Fight Antitrust Case Ruling

American Express appears ready to fight to the bitter end for the right to control the terms of its merchant contracts — and that goes beyond a federal judge’s antitrust ruling in February that would allow AmEx-accepting merchants to suggest that customers use other, less expensive payment cards according to American Banker.

Last Wednesday (March 25), AmEx CEO Kenneth Chenault said his company would appeal that ruling. “Fighting this suit was the right call in 2010, and continuing to fight is the right call now,” Chenault said at the company’s investor day. Chenault also testified during the antitrust trial that if steering is allowed, AmEx “will not survive as a company.”

But steering may not be the bottom-line issue. AmEx general counsel Laureen Seeger said the real fight is over the company’s ability to structure merchant contracts as it wishes. “Whether or not steering is occurring today or will occur in the future, we wish to preserve our right to contract with our customers and our merchants the way that we feel is appropriate for the long term, and that’s why we are maintaining the lawsuit,” Seeger said.

That makes somewhat more sense of AmEx’s dogged determination to fight the lawsuit for the five years since the U.S. Justice Department filed it in 2010 against AmEx, Visa and MasterCard. The larger card brands settled in 2011 and removed anti-steering terms from their merchant contracts. A feared uptick in merchants steering customers to cards with lower interchange fees never materialized, just as merchants showed no interest in slapping a surcharge on customers who use payment cards after that was allowed in 2013 as part of a massive interchange settlement.

But AmEx, which typically charges merchants an extra 30 basis points per transaction compared with Visa or MasterCard, operates under a different business model than the bank card brands — most of its cards aren’t designed for revolving credit, and it leans more heavily on rewards than the two much larger brands. AmEx may also see other specific terms in its merchant agreements that it believes are crucial to its model, and wants to make its stand over the anti-steering requirement.

What’s clear is that AmEx plans to keep fighting. U.S. District Judge Nicholas Garaufis gave the company until March 21 to negotiate a settlement with the Justice Department, and that deadline passed without an agreement. AmEx has said it will appeal — which it can’t do until the judge issues an order that sets a remedy in the case — but also said last week that it will ask for a stay of Garaufis’ ruling until its appeals are exhausted.