American Express can continue prohibiting its merchant
clients from steering customers to less expensive forms of payment, the card
network confirmed to BTN on Monday. A
U.S. court of appeals on Friday ordered a temporary stay on an April
decision that required Amex to amend its anti-steering rules after Amex lost
its lawsuit to the U.S. Department of Justice in February.
“As long as this order remains in effect, American Express
is no longer subject to the trial court’s injunction,” an Amex spokesperson
wrote in an email to BTN. “We are
evaluating next steps, but under the order issued [Friday,] American Express is
entitled to enforce its pre-injunction Non-Discrimination Provisions.”
The Saga ContinuesAmex has been fighting the case since 2010,
when the Department of Justice first brought the suit against the three major
card companies, including MasterCard and Visa.
In February U.S. District Judge for the Eastern District of
New York Nicholas Garaufis concluded Amex’s merchant agreement provisions
violated federal law and constituted “unreasonable restraints on trade.” It
gave the card network 30 days to amend or eliminate its provisions. The ruling
prompted BTN to name the judge one of
the 25
Most Influential people of 2015.
Amex, maintaining that the ruling would harm consumers,
appealed the decision and requested a stay until the appeal process concluded. In
May the court denied
Amex’s request for a stay because it determined Amex would be able to
sustain any economic harm suffered during the appeals process as a result
merchant steering, and that the card network failed to prove its anti-steering
provisions were necessary for competition. As part of this decision, however,
the court granted Amex 30 days to seek a longer stay from an appeals court.
After 30 days, merchants were free to steer customers from
Amex to preferred forms of payment, while the appeal proceeded.
What It Means
When asked about the impact of the lawsuit, Amex CEO Jeffrey
Campbell during its third-quarter
earnings call in October said the ruling had not yet had an impact on its
business.
According to one analyst, that’s because steering hasn’t
gained traction since the April decision. Likewise, consumers may not have experienced
much impact from the back-and-forth appeals process to grant Amex a stay.
“There hasn’t really been a significant move towards
steering and the whole concept of steering will have very limited utility,” said
Credit Suisse analyst Moshe Orenbuch. “Most merchants, despite the fact that they
love to complain about how much it costs to pay for stuff, still want to sell
more stuff than not, so there isn’t a general willingness to try to
significantly influence the consumer.”
On the contrary, there’s a risk of losing business if a
customer can’t use its preferred method of payment, he added.
Had other card networks made a bigger push for steering
following the decision, the impact could have been bigger, “but I don’t think
that happened,” Orenbuch said.
The court’s decision to grant a stay shouldn’t be indicative
of Amex’s likelihood of winning the appeal, Orenbuch said. The decision, he
said, likely had to do with an expectation of fairness. Penalizing a company
for the entire life of the appeal could be perceived as unfair, but “this makes
more sense,” he said.