The U.S. Supreme Court ruled on Monday in a 5-4 opinion that
American Express' rules barring Amex-accepting merchants from steering
customers to less expensive forms of payments are not anticompetitive.
The controversial decision settles an antitrust case that
began in 2010 and has gone to multiple courts in the past eight years.
"There is nothing inherently anticompetitive about the
provisions. These agreements actually stem negative externalities in the credit
card market and promote interbrand competition," Justice Clarence Thomas
wrote in his opinion, which was supported by Justices John Roberts, Anthony
Kennedy, Samuel Alito and Neil Gorsuch.
The decision stated that the plaintiffs, 11 state attorneys
general led by Ohio attorney Mike DeWine, did not demonstrate anticompetitive
effects for both sides -- merchants and cardholders -- of a two-sided
transaction platform.
"Evidence of a price increase on one side of a
two-sided transaction platform cannot by itself demonstrate an anticompetitive
exercise of market power," Thomas wrote. "Instead plaintiffs must
prove that American Express' anti-steering provisions increased the cost of
credit card transactions above a competitive level, reduced the number of
credit card transactions or otherwise stifled competition in the two-sided
credit card market. They failed to do so."
On the contrary, Thomas said, Amex competitors Visa and
Mastercard have continued to increase their merchant fees, including at
merchant locations where Amex is not accepted, thereby proving that Amex's anti-steering
provisions alone are not causing higher merchant fees across the market.
Additionally, Thomas noted that Amex's business model has
stimulated "competitive innovations," including Visa and Mastercard's
launch of premium cards offering consumers better rewards while charging
merchants more for accepting them, similar to Amex's business model. Amex also
has made banking and card payment services available to low-income consumers
who otherwise would not qualify for credit cards or be able to afford
traditional bank fees, Thomas continued.
Amex chairman and CEO Stephen Squeri said that since the
case began eight years ago, the card network has significantly expanded its
merchant network, increased merchant satisfaction and broadened cardholder
benefits, services and experiences that build loyalty.
"The court's decision is a major victory for consumers
and for American Express," he said.
What does it mean for business travelers? Not much,
according to Mark Williams, CFO of consulting company Dots and Lines.
"In today's environment, where using your corporate
card is so convenient because it's probably linked to an expense tool that
automatically populates expenses and gets paid by the company, you're probably
not going to listen to a merchant trying to steer you away from one card to
another. There are just too many conveniences attached to using the company's
card of choice," he said.
He also noted a convergence among the networks' merchant
discount rates, which are the rates merchants pay per transaction to accept a
particular network's card. Amex's discount rate, known as one of the highest,
has steadily declined over the past few years. During earnings calls, Amex
executives often have attributed the decline to the expansion of its OptBlue
small business acquiring program and to merchant negotiations in regulated
international markets.
In March, Amex revised its 2018 discount rate outlook from
decreasing between 2 and 3 basis points to decreasing between 5 and 6 basis
points. At the time, Amex president of global merchant services and loyalty
Anre Williams said that despite the discount rate decrease, Amex revenue from
that discount grew an average of 5.3% the past two years.
The real competition between the networks for corporate
clients will come down to service and the kind of data a network can deliver,
and Williams said Amex always has been good in that regard.
"If I'm a buyer,
[I want to know] what are the financial aspects of my deal, what kind of rebate
am I going to get, how is it structured, how will that be paid and what can I
do with the data you're supplying to me," he said. "The rest doesn't
get focused on that much anymore ... especially if acceptability and the
merchant discount is converging."
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Source: Business Travel News