By Robin Sidel and Christopher M. Matthews 

A federal appeals court Monday tossed an antitrust judgment against American Express Co., ruling the credit-card company can continue barring merchants from steering customers to cards with lower fees.

The decision reversed a lower court ruling that determined AmEx violated antitrust rules by prohibiting merchants who accept its cards from encouraging use of other cheaper cards from Visa Inc. and MasterCard Inc.

The ruling Monday by the Second U.S. Circuit Court of Appeals means business owners who accept American Express cards won't be able to ask customers to use a different card, even though such a move could save them money.

The decision represents a victory for longtime AmEx Chief Executive Kenneth Chenault, a Harvard-trained lawyer who refused to settle the suit brought by the Justice Department in 2010.

A spokesman for the Justice Department, which could appeal the ruling, declined to comment.

Mr. Chenault testified in the case, which went to trial in Brooklyn, N.Y., in 2014. U.S. District Judge Nicholas Garaufis sided with the government, ruling that merchants should be able to offer discounts to shoppers for using cards from AmEx competitors.

But the appeals court said in its 66-page ruling that the Justice Department hadn't proven that AmEx's rules hurt merchants and cardholders. It added that merchants who find that AmEx's fees outweigh the benefits can simply choose not to accept the cards.

After the ruling, Mr. Chenault wrote to employees that "we are excited about the clear and unmistakable message that the appellate court sent today, and we stand ready to continue the fight if need be."

If the government doesn't appeal, the decision would put an end to the six-year-old case at a time when AmEx has been struggling with a revenue slowdown and ferocious competition for affluent spenders.

Merchants have long complained that they pay higher fees each time a customer uses an AmEx card versus a card branded with the Visa or MasterCard logo. AmEx uses the fees that it charges to merchants to fund its rewards programs and provide other perks to its cardholders.

AmEx executives were hopeful that the appeals court might overturn its decision when it ruled late last year that AmEx could continue enforcing its prohibition on steering to cheaper cards while the case was under appeal. Still, the reversal wasn't a sure thing and the timing for a decision wasn't known.

"Cardholder insistence is exactly what makes it worthwhile for merchants to accept AmEx cards -- and thus cardholder insistence is exactly what makes it worthwhile for merchants to pay the relatively high fees that AmEx charges," the ruling said.

The court went on to say that "AmEx has a legitimate interest in seeing that cardholders who take advantage of amenities offered to AmEx cardholders simply by virtue of owning the card aren't enticed to use their Visa or MasterCard by card-connected discounts from merchants."

AmEx had said in financial filings that a loss of the case could result in a material adverse effect on its business.

Monday, AmEx said in a statement that "consumers will be able to choose how they pay and our Card Members will not be discriminated against."

Write to Robin Sidel at robin.sidel@wsj.com and Christopher M. Matthews at christopher.matthews@wsj.com

 

(END) Dow Jones Newswires

September 27, 2016 02:47 ET (06:47 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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