By Robin Sidel 

A federal judge ordered American Express Co. to let merchants steer customers to other forms of plastic payments, including debit cards.

The order implements a February ruling by U.S. District Judge Nicholas Garaufis that New York-based American Express violated antitrust laws by not permitting merchants to encourage customers to use cheaper cards. His ruling followed a bench trial last year.

American Express reiterated that it will appeal the decision, saying it will hurt competition.

"As we have previously stated, we plan to appeal the court's ruling because we believe it will not provide any benefit to consumers and will in fact harm competition by further entrenching the two dominant networks," the company said in a statement. It was referring to rival payment networks Visa Inc. and MasterCard Inc., which are larger than AmEx.

The decision gives merchants latitude to encourage customers to use cards other than those offered by AmEx by offering them discounts, rebates or other enticements. AmEx's longstanding rules don't permit merchants to steer to other forms of payment.

The case dates back to 2010, when the Justice Department filed a lawsuit against AmEx, contending that its merchant rules inhibit competition and raise fees for consumers. The lawsuit was filed just a day after Visa and MasterCard agreed to scrap similar stipulations.

The judge said AmEx must notify merchants of the court ruling and include a statement that says, "As a result of that ruling, you may now favor any credit card brand that you wish, by, for example, communicating to customers which credit card brand you would prefer that they use, telling customers which credit card brands are the most or least expensive for you, or offering discounts or incentives to customers to use the credit card brand you prefer."

The notification also warns merchants, however, that they aren't permitted to "disparage or mischaracterize the American Express brand."

Merchants also aren't permitted to charge customers more for using an AmEx card, although they can offer a discount for using a card other than AmEx.

American Express shares were unchanged in after-hours trading, after rising 0.4% to $77.45 in regular trading.

Write to Robin Sidel at robin.sidel@wsj.com

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