AmEx and the DoJ Go to War

Apr 09, 2015

This week American Express (AmEx) and the U.S. Department of Justice issued proposals to a federal judge for a rules change related to merchants steering customers to cheaper forms of payment than AmEx. These proposals are in response the DoJ’s claims that AmEx’s steering practice is a violation of the Sherman Anti-Trust Act. On February 19, a federal court agreed with the DoJ that AmEx’s anti-steering rules, or non-discrimination provisions (NDPs) do violate anti-trust laws, and that both sides had until Monday to propose remedies that would least affect AmEx’s business model. The proposals submitted by the DoJ and AmEx were miles apart, however, and AmEx states that it plans to appeal.

AmEx argues that it delivers a higher spending customer to retailers and has the highest discount rates among the four major payment networks. AmEx executives claim that if the NDPs are eliminated, the company will not be able to survive. Many observers dispute this claim. The DoJ believes that AmEx should not be allowed to stop merchants from offering rebates or discounts on products and services for using a payment form other than what was initially presented. While AmEx’s proposal would basically reinstate the restrictions that the court found unlawful.

AmEx wants the ability to control some steering, including the authority to prevent “mischaracterizing its network and products,” the ability to terminate merchants that steer, and to receive notice from merchants that intend to steer. AmEx also wants to negotiate its own steering agreements. The company also claims that the court’s ruling will not help consumers, but will only hurt AmEx’s ability to compete with its rivals like, Visa Inc. and MasterCard Inc. AmEx representatives state that they believe the court’s ruling is misguided and flawed, and that they will prevail upon repeal.

The DoJ also went after Visa and MasterCard over their anti-steering rules, however these two companies settled out of court by agreeing to change their steering rules.

Does your herbal supplement business process important credit cards like Visa and MasterCard? Do you have ties to AmEx and are concerned about this latest ruling? You may have to consider dealing with other credit card companies. Contact eMerchantBroker.com and talk to our specialists about protecting your herbal supplement merchant account today.

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