In a rare occurrence, a payment network, namely American Express, won a round in court yesterday. As reported in the New York Times:
On Monday, a federal appeals court ruled that American Express could stop merchants that accept its cards from encouraging customers to use rival payment cards that charge the stores lower transaction fees. The decision reversed a lower court’s 2015 ruling that such restrictions violated federal antitrust law.
This means that American Express can enforce contracts with merchants and keep them from convincing customers to use another, potentially less expense form of payment.
The decision stems from 2010 lawsuit brought by the Justice Department and attorneys general in 17 states. Last year, Judge Nicholas G. Garaufis of the United States District Court for the Eastern District of New York ruled that prohibiting merchants from steering customers toward other forms of payment constituted “an unlawful restraint on trade.”
But on Monday, the United States Court of Appeals for the Second Circuit disagreed, saying that the decision focused only on the merchants’ interests, “while discounting the interests of cardholders
American Express sees this clearly as a victory and champion the idea that it will offer cardholders more choice. Merchants however are not obligated to accept American Express at all. It will be interesting to watch if American Express really enforces their rights or if merchants decide they can live without America Express.
Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group
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