A Supreme Court ruling in favor of American Express that will prevent retailers from encouraging customers to choose credit cards with lower processing fees is not sitting well with the industry.
National Retail Federation officials warned the ruling will cost both consumers and merchants billions of dollars and NRF's SVP and General Counsel Stephanie Martz called it a "blow to competition and transparency in the credit card market."
Keeping in mind that card industry rules have resulted in retailers being forced to build swipe fees into the price of merchandise, which NRF officials said costs consumers hundreds of dollars per year for the average family, Martz says the AmEx rules in question have "amounted to a gag order on retailers’ ability to educate their customers on how high swipe fees drive up the price of merchandise."
According to NRF, AmEx typically charges higher transaction fees than the typical 2%, with Visa and Mastercard in the middle and Discover the lowest.
“By denying merchants the right to simply ask for another card or offer an incentive for using a preferred card, the Supreme Court has undermined the principle of free markets where one company should not be allowed to dictate the practices of an entire industry in order to protect its business model,” Martz said. “This misguided decision represents a missed opportunity to take a stand in favor of free markets and bring soaring credit card fees under control.”
Food Marketing Institute Senior Director of Technology and Nutrition Policy Hannah Walker also voiced the institute's "disappointment" in the decision to "prohibit retailers from discussing hidden fees with their shoppers as well as banning customer incentives to use a less expensive card at checkout," adding that the ruling "stifles competition and throws a curtain on transparency in the credit card market, harming both consumers and retailers.”
“U.S. merchants pay an estimated $97 billion annually in hidden processing fees," she said. "These fees, particularly credit card fees, continue to increase unchecked every year and are hidden from consumers."
AmEx, Visa and Mastercard all had rules prohibiting retailer from encouraging the use of lower-fee cards, but Visa and Mastercard both dropped these restrictions following a 2010 settlement with the U.S. Department of Justice, while AmEx refused to give up the fight resulting in a lawsuit from the Department of Justice, according to NRF.
In 2015, a U.S. District Court judge ruled that the AmEx rules were a violation of federal antitrust law, but AmEx appealed the decision.
In a friend-of-the-court brief filed late last year, NRF, other retail groups and retailers such as Walmart and Target said the AmEx rules “lead to increased prices for all consumers.”