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The Supreme Court is making a ruling for American Express as part of a lawsuit for rules it imposes on merchants who accept its cards. The High Court ruled 5-4 Monday in favor of American Express. (J. Scott Applewhite / AP)
The Supreme Court sat down on the side of American Express Monday in a matter of credit card fees, with major implications not just for the credit card industry, but for some of the Largest companies in the country like Google and Facebook.
In a 5 to 4 ruling, the court ruled that American Express could use contract language to prevent retailers and merchants from directing their customers to competing credit card networks such as Visa and Mastercard.
American Express charges merchants higher fees for using its payment platform, which it says helps the company to provide better benefits to cardholders. But higher fees have led some merchants to encourage consumers to pay using cheaper non-Amex cards. To counteract this practice, Amex sought to use in its merchant contracts what is called the "anti-bend provisions" – a legal language that the Department of Justice and a number of states have qualified for anti-competitive and harmful for traders.
The court decision on Monday concluded that the plaintiffs – the Department of Justice and several states, including Ohio – needed to go further and prove that Amex's practices were harmful. for both traders and consumers.
"Their argument – that Amex's prior art provisions increase traders' fees – is mistakenly focused on one side of the market," Justice Clarence Thomas wrote for the court.
The decision is a major victory for American Express, which said Monday that the decision "will help promote competition and innovation in the payments industry." The Ministry of Justice declined to comment.
The decision Ohio v. American Express will probably be interpreted as applying to other major platforms, including those of the technology industry, say analysts. Like Amex, companies such as Amazon, Facebook and Google operate in what economists call bilateral markets: they all serve on the one hand the average users of the market. Internet, and on the other hand third – party businesses – including independent retailers and advertisers -. . (The CEO of Amazon Jeffrey P. Bezos also owns the Washington Post.)
The Court's ruling could protect technology platforms from litigation if plaintiffs can not prove that platform practices are hurting both sides of a bilateral market, said Hal Singer, an economist at the University of Toronto. Institute of Public Policy of George Washington University.
"What this would do, is that it would prevent an advertiser, or the government on behalf of the advertisers, from bringing an action against Google unless it could harm consumers," Singer said. .
The decision could fuel a wider debate about the power of big tech companies at a time when companies like Google and Facebook are undergoing scrutiny for their role in shaping the discourse in line and influence the outcome of the elections.
"For technology companies, this creates a huge shield against challenges to their dominant positions, as small competitors claim harms and some segments of consumers are hurting," said Gene Kimmelman, former head of the Justice Department. .
Advocates of the technology industry had argued in court that judges should consider both sides of a bilateral market to assess whether a company behaves in an anti-competitive manner.
"Conduct that might seem anti-competitive when only one set of customers is contemplated could actually be fully in line with sound competition and actually promote it when competition from both sides is contemplated," writes the Association. of the computer industry and communication in a memoir.
Stephanie Martz, Senior Vice President and General Counsel of the National Retail Federation, said the group did not agree with the ruling as it prohibited traders from being transparent about the costs of transfer, which are ultimately passed on to consumers. "We think the court made a pretty serious mistake," said Martz, "because there is no doubt that when a consumer has more information than less information, he makes better decisions. "
Martz said the benefits of credit cards to consumers should be treated separately from fees charged to merchants. Instead, the current system allows card companies to "subsidize" the equipment that they offer cardholders with the fees they charge businesses, Martz said.
Indeed, some credit card experts say that a decision against American Express could have removed the luster of some credit card rewards programs by making it more expensive for card companies to woo customers by offering flights , cashback and other benefits.
Amex relies much more on credit transfer fees than other credit card issuers because less of its revenues come from interest rate fees, said Matt Schulz, a senior analyst at CreditCards.com. Many Amex clients are high-wage earners who pay their balances completely every month, which prevents them from paying interest on their purchases. The tilt towards transaction fees can also be traced back to the first American Express credit card, which was a "credit card" that had to be repaid in full each month, Shulz said.
Other experts have stated that consumers should not experience price increases as a result of the decision because it only confirms the existing relationship between Amex and the merchants.
"American Express has been around for a long time," said Jeffrey Blumenfeld, an antitrust attorney at Lowenstein Sandler in Washington. "I do not know if we've seen any negative price effects from its existence, and I do not see why this decision would change the prices of traders when it does not change the way Amex interacts with traders."
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