American Express Case Goes to U.S. Supreme Court

The high court agreed to hear an appeal that challenges the credit-card firm’s push of customers to use credit cards with lower transaction fees.
October 18, 2017

WASHINGTON – The U.S. Supreme Court will hear an appeal from 11 states that disputes American Express’s regulations mandating that retailers who accept AmEx cannot ask consumers to pay with cards that have lower swipe fees, The Hill reports. Ohio was the first state to file the lawsuit, and has been joined by Vermont, Utah, Rhode Island, Montana, Michigan, Maryland, Iowa, Illinois, Idaho and Connecticut.

The states allege that the AmEx rules go against federal antitrust law because the regulations restrict trade. AmEx adopted the prohibitions when MasterCard and Visa’s 1980s ad campaigns touted American Express’s smaller network and higher swipe fees. The states’ argument is that the AmEx regulations have in fact raised industry swipe fees across the board.

AmEx replied that the mandate gives it a place at the table because MasterCard and Visa have a combined 68% of credit-card transactions. The Second Circuit Court of Appeals threw out a lower court decision that had forbidden AmEx from enforcing its regulations.

“Though merchants may desire lower fees, those fees are necessary to maintaining cardholder satisfaction—and if a particular merchant finds that the cost of Amex fees outweighs the benefit it gains by accepting Amex cards, then the merchant can choose to not accept Amex cards,” the Second Circuit Court of Appeals said. “Indeed, many merchants have already made and continue to make this choice.”

In 2010, the U.S Justice Department signed on with the states against AmEx in district court, but by August 2017, the agency had backed off. “Although the court of appeals’ decision was erroneous, this case does not satisfy this Court’s traditional standards for certiorari,” then-Acting Solicitor General Jeffrey Wall wrote. “Most importantly, the court of appeals’ decision does not directly conflict with any decision of this Court or another court of appeals.”

The states countered that the case had too much importance to wait. “Given the pervasive significance of credit cards to the national economy, the question here is of undoubted importance,” according to the states.