American Express is fighting a U.S. Department of Justice
antitrust lawsuit filed early this month that claims the card company, along
with rivals Visa and MasterCard, prohibits merchants from offering incentives
to use cheaper forms of payment.
Though Visa and MasterCard are named in the suit, the card
networks agreed to a settlement with DOJ that, if approved by the court,
immediately would "require the two companies to allow merchants to offer
discounts, incentives and information to consumers to encourage the use of
payment methods that are less costly," DOJ said.
American Express, however, said it would fight DOJ in court,
claiming its merchant agreements "protect cardmembers against discrimination
and disruption at the point of sale."
American Express has long charged higher fees to merchants
in exchange for what it claims to be higher per-card spending and superior
cardholder service. However, DOJ, joined by the states of Connecticut, Iowa,
Maryland, Michigan, Missouri, Ohio and Texas in the suit, said the card
provider's rules preclude merchants from encouraging consumers to use cheaper
forms of payment.
"The proposed settlement with MasterCard and Visa is an
important step in bringing more credit card competition to the point of sale,"
said Christine Varney, assistant attorney general and head of DOJ's antitrust
division. "The department's lawsuit against American Express will continue
that effort and, if successful, allow merchants more freedom to benefit their
customers."
Amex chairman and CEO Kenneth Chenault claimed DOJ would
give unfair advantage to Visa and MasterCard, which have lower merchant fees.
Chenault in a memo to employees explained the American
Express merchant agreement clause that has come under fire. "These
protections are designed to ensure that our cardmembers are not discriminated
against or inconvenienced by being asked to use another card at the point of
sale," he claimed. "This practice is known as steering, and the
Justice Department is seeking to allow it."
American Express is by no means the dominant card provider
in the United States, and Chenault said merchants have the freedom to accept
their payment products or rely on competing forms of payment. "Merchants
are free to either accept or not accept American Express cards," Chenault
noted. "Likewise, consumers are free to use any card they wish. But when a
merchant has signed a contract to accept American Express cards and a
cardmember wants to use his or her card at that establishment, the consumer
should be able to exercise their right without interference."
This report appeared
in the Oct. 25 issue of Business Travel News.