Judge Rules that American Express Violated Antitrust Laws
A federal judge ruled in a court in Brooklyn, NY that American Express violated US antitrust laws by banning merchants use of other cards and charging higher merchant fees than Visa or Discover.
Seven states brought lawsuits against American Express to a federal court in October 2010, claiming that the credit card company’s use of “non-discrimination provisions,” or NPDs, prevents at least 3.4 million merchants nationwide from steering customers away from using their American Express cards, due to the expense on the merchant.
“As a general matter, steering is both pro-competitive and ubiquitous,” U.S. District Judge Nicholas Garaufis wrote in the decision. American Express tried to argue that the merchant restraints actually promoted competition, which would not violate antitrust laws. However, Judge Garaufis argued instead that many merchants have historically steered consumers toward deals that were better for the merchant, for example by placing products at eye level rather than on the bottom shelf. However, American Express’s policies prevented merchants from doing the equivalent with credit cards they accepted in stores. The policies “create an environment in which there is nothing to offset credit card networks’ incentives – including American Express’s incentive – to charge merchants inflated prices for their services,” Garaufis wrote.
“This, in turn, results in higher costs to all consumers who purchase goods and services from these merchants,” the judge added.
Visa and Mastercard had similar NDPs until 2010, when a settlement with the Justice Department ended the practice.
“Today’s decision is a triumph for fair competition and for American consumers,” U.S. Attorney General Eric Holder said in a statement. “By recognizing that American Express’s rules harm competition, the court vindicates the promise of robust marketplaces that is enshrined in our antitrust laws.”
“We believe that freedom of choice and fair competition are worth defending,” American Express said, after announcing that the company would appeal the court’s antitrust decision.
“Eliminating these protections,” American Express claimed “would inhibit consumers’ choice to pay with their preferred payment method and allow merchants who have agreed to honor our cards to then discriminate against them when our card members choose to pay with American Express.”
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The Strom Law Firm LLC’s business litigation practice is focused on representing individuals, officers, directors, public companies, and private corporations involved in complex civil disputes. We concentrate our resources and efforts on business and commercial litigation involving:
- Breach of contract claims
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A South Carolina federal defense attorney at the Strom Law Firm, LLC will fight tirelessly to defend you against South Carolina antitrust violations. Founded in 1996 by a former US Attorney, we know what it takes to defend crimes not only on a state level, but also on a federal level as well. We are here to help you. Contact an experienced South Carolina federal antitrust defense attorney at the Strom Law Firm today for a free consultation.