NEW YORK – A judge has ruled that American Express violated U.S. antitrust laws by barring merchants from asking customers to prefer one credit card over another.
U.S. District Judge Nicholas Garaufis said in his ruling that American Express’ nondisclosure policies harmed competition and prevented merchants from trying to lower their credit card processing costs. He also ruled that AmEx’s policies deliberately kept consumers unaware how much using their cards cost merchants each time they use it.
The case was a major blow to AmEx, who argued that its policies kept it competitive against the larger payment networks Visa and MasterCard.
American Express, in a statement, said it was disappointed with the decision and will appeal.
At the center of the case are the fees merchants pay to process credit and debit cards, which have been largely hidden from the average consumer. Every time a credit or debit card is used at a merchant, the banks and payment networks would take a small percentage of the transaction as a fee.
The fee varies on what type of card is used, but typically debit cards were cheaper for merchants to process than credit cards. The credit cards that gave consumers things such as reward points, cash back or airline miles, which are the cards American Express offers, were among the most expensive for merchants to process.
