Myles Udland at Business Insider reports: The bad news for American Express just won't stop:
On Thursday, a report from Bloomberg News said American Express violated antitrust laws by barring businesses from asking customers to use lower-cost credit cards.
In a statement to CNBC, AmEx said it planned to file an appeal.
Following this report, shares of the credit-card company were down about 1.8%.
This latest bit of negative news for AmEx follows a tough week in which the company saw its partnership with Costco end, while a report from Bloomberg said the airline JetBlue was also ending its co-branded card agreement with the company…
Read also:
- For American Express, 'everything is moving in the wrong direction' Business Insider
- American Express Loses Antitrust Suit Over Merchant Rules Bloomberg
The U.S. Justice Department’s victory on Thursday in its lawsuit against the credit card company might give merchants more leverage in their effort to cut the costs, which are largely hidden from consumers, and is the latest in a series of blows to the New York-based firm after partnerships with Costco Wholesale Corp. and JetBlue Airways Corp. ended.
Citigroup’s Donald Fandetti doesn’t think the decision is as bad as it looks:
"This morning, US District Judge Nicholas Garaufis ruled against American Express in the DOJ suit around card “steering”. In their merchant contracts, American Express has language that does not allow the merchant to discriminatorily steer consumers to another card through discounting (i.e. non-discrimination provisions). Meaning, the retailer can’t put up a sign that says 2% discount for using XYX card, steering away from American Express…"
- DOJ, States Beat American Express In Merchant Fee Case Investor's Business Daily
The New York-based credit card company argued that the higher fees promote competition by allowing it to compete with Visa (NYSE:V) and MasterCard (NYSE:MA) as well as providing more generous services. Customers also may be less likely to use American Express credit cards if merchants express a preference for other cards, AmEx argued.
[…]
The fees charged to merchants each time a consumer swipes his or her credit card — usually 2% to 5% of the purchase price — have become a contentious issue in recent years. In 2013, Visa and MasterCard agreed to pay $5.7 billion to settle a class action suit that alleged that credit card companies violated antitrust law via illegally high merchant fees.
- American Express card rules violated U.S. antitrust law – judge Reuters
- AmEx hit with latest blow over merchant rules CNBC
The decision is the latest blow to AmEx, which recently announced that it would cut more than 4,000 jobs over the next year as it battles to control costs.
The exclusive deal with Costco, set to end on March 31, 2016, is a substantial loss for AmEx. In 2014, the Costco partnership accounted for 8% of "billed business" (~$80 billion) and about 10% of cards in force (~11 million). (For American Express, 'everything is moving in the wrong direction'.)
