Supreme Court agrees to hear American Express case

The Supreme Court on Monday agreed to hear an appeal from 11 states challenging American Express’s rules prohibiting merchants that accept its card from persuading shoppers to use credit cards that charge lower swipe fees.

Ohio initially brought the case, which was joined by Connecticut, Idaho, Illinois, Iowa, Maryland, Michigan, Montana, Rhode Island, Utah and Vermont. The states claim that the American Express rules violate the federal antitrust law by restricting trade.

The company enacted the rules after Visa and MasterCard started running advertising campaigns in the 1980s targeting American Express’s smaller acceptance network and higher merchant fees, according to court documents.

{mosads}The states argue that the company’s rules have had the actual market effect of raising the amount that the industry charges merchants.

American Express, however, says its rules have allowed it to compete in a market where Visa and MasterCard command a combined share of 68 percent of credit card transactions.

The Second Circuit Court of Appeals tossed out a lower court ruling that blocked the company from enforcing its rules.  

“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 court said.

“Indeed, many merchants have already made and continue to make this choice,” it said.

In 2010, the Department of Justice (DOJ) under former President Obama joined the states in suing American Express in the district court. In August, however, the DOJ urged the Supreme Court not to take the case given the lack of a circuit split on the issue.

“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.”

Wall wrote that “further percolation” in the lower courts could be useful given “the idiosyncratic character of the agreements at issue here.”

The states said the issues in the case were too important for the court to wait out the action.

“Given the pervasive significance of credit cards to the national economy, the question here is of undoubted importance,” the states said, noting that merchants collectively paid more than $52 billion in credit card transaction fees in 2014.