American Express Antitrust Trial to Begin Today

American Express will face off today in a trial against the United States government and 17 states over claims that it hinders competition from credit card providers that charge lower processing fees.  This trial is expected to last throughout the summer and will address American Express rules that bar its millions of merchants from offering incentives for customers to use less expensive credit cards or cash when making purchases.  United States Judge Nicholas Garaufis is expected to preside over the non-jury trial.

The case stems from a civil antitrust suit filed by the Justice Department in 2010 which said AmEx’s rules for merchants inhibited competition and ultimately created higher fees for consumers.  The government isn’t seeking monetary damages in this case and only hopes to force AmEx to drop its merchant restrictions.  Testimonies are expected from AmEx Chief Executive Kenneth Chenault and roughly 30 merchants including Best Buy Co., Safeway Inc., and Jo-Ann Stores LLC.

Visa Inc. and MasterCard Inc. were also involved in the 2010 suit but chose to settle the case on the same day it was filed.  Under their settlement, the two companies agreed to allow merchants to offer discounts, rebates, and other inventive to get customers to use cards with lower merchant fees.

American Express has defended the restrictions they place on merchants by saying they aren’t large enough create an anticompetitive presence in the industry.  In 2013, there were 53.6 million AmEx cards in circulation compared to 254.1 million United States issued cards from Visa and 178.3 million cards from MasterCard.

The case is United States of America, et al v. American Express Co, U.S. District Court for the Eastern District of New York, No. 10-04496.

Posted in AntiTrust Law |