BIRMINGHAM, Ala.—A federal judge has ordered American Express to adjust its merchant agreements that prohibit retailers from encouraging their customers to use credit cards with fewer transaction fees.
The ruling may spark more retailers to begin offering discounts for Visa, MasterCard and Discover swipes, according to one analyst, who also questions the retailer benefits from such moves.
American Express has some of the costliest interchange fees in the industry, but until now, merchants were not allowed to steer customers to pay with cheaper cards, explained Bill Hardekopf, CEO of LowCards.com.
Under this ruling, store owners will be able to reward customers who choose to pay with Visa, Discover, or MasterCard with incentives, such as discounts or rebates.
Hardekopf thinks the decision will lead to only a “handful” of retailers giving purchase discounts on cards with lower merchant fees.
“You may see some additional merchants do this because they no longer have their hands tied by American Express,” said Hardekopf. “But the last thing you want to do is confuse the consumer. You want the transaction to be simple, easy and transparent. Personally, I think it is better for retailers to have one price for their items out the door.”
Hardekopf added that the ruling is the most recent in a series of blows American Express has faced over the last few months. The company lost its longstanding contracts with JetBlue and Costco, despite the fact that it consistently rates at the top for customer satisfaction.
American Express spoke out about the ruling in a statement, saying, "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," referring to Visa and MasterCard.
Merchants are allowed to promote cheaper alternatives 30 days after the ruling.