Federal appeals court rules American Express anti-steering credit card policies do not violate antitrust laws News
Federal appeals court rules American Express anti-steering credit card policies do not violate antitrust laws

[JURIST] The US Court of Appeals for the Second Circuit [official website] ruled [opinion, PDF] Monday that American Express (Amex) [corporate website] can enforce rules that ban merchants accepting its credit cards from directing customers to its competitors’ cards. The court reversed a lower court’s determination that Amex’s agreements with merchants impermissibly restrained trade in violation of antitrust laws. The court held:

We conclude that, so long as Amex’s market share is derived from cardholder satisfaction, there is no reason to intervene and disturb the present functioning of the payment‐card industry. Whatever market power Amex has appears, on this record, to be based on its rewards programs and perceived prestige, i.e., Amex cardholders regard the card as cheaper than competing Visa and MasterCard cards. The [nondiscriminatory provisions] (NDPs) protect that program and that prestige. Outlawing the NDPs would appear to reduce this protection—and likely with the result of increasing the market shares of Visa and MasterCard.

The Second Circuit directed that judgment be entered in favor of Amex.

There have been several high-profile cases involving credit card companies in the last several years. In April 2014 a judge for the US District Court for the Southern District of New York [official website] dismissed [JURIST report] a class action lawsuit against Amex, Citigroup and Discover Financial Services [corporate websites] that alleged the three credit card issuers violated the Sherman Act by colluding to require that all disputes be settled in arbitration. The plaintiffs in the case were seeking injunctive relief to prohibit these credit card issuers from putting such arbitration clauses in their agreements. In August 2014 a judge for the US District Court for the Southern District of New York approved a settlement [JURIST report] in which Citigroup will pay its investors over $590 million for misrepresenting its assets in securities linked to the sub-prime mortgage crisis [JURIST news archive]. In June 2014 the US Supreme Court ruled [JURIST report] in American Express Co. v. Italian Colors Restaurant that the Federal Arbitration Act [text] does not permit courts to invalidate a contractual waiver of class arbitration on the ground that the plaintiff’s cost of individually arbitrating a federal statutory claim exceeds the potential recovery.