Antitrust and Credit Card Steering

The Department of Justice filed a civil antitrust suit against Visa, Master Card and American Express challenging their policies that prohibit merchants from steering customers to other forms of payment. Credit card companies earn fees from credit card transactions, and these transaction fees are higher on some types of cards than others. (Typically, reward cards charge higher fees). Visa, MasterCard and American Express prohibited merchants from offering discounts to customers who use a cheaper type of credit card (i.e. one with less transaction fees). The Justice Department claims that these restraints prevent "merchants from freely promoting interbrand competition among [credit card] networks by offering customers discounts, other benefits, or information to encourage them to use a less-expensive [credit card] or other payment method."

Visa and Mastercard hare already entered into a settlement agreement with the Department of Justice and have agreed not to prohibit merchants from offering discounts or otherwise steering customers to less expensive types of payment methods.

American Express, who usually charges higher transaction fees, however, vows to fight the DOJ's charges and claims that the settlement agreement gives more market power to Visa and Mastercard because they will be able to steer customers away from American Express. The Wall Street Journal quotes American Express's CEO as saying: "We are confident that courts will recognize the perverse anticompetitive nature of the government's case and that we will continue providing a competitive, superior service to card members and merchants."

Attorney General Eric Holder responded: "Because American Express has refused to change its rules, consumers are being held hostage from receiving the expanded choices and lower prices that they deserve under our settlement. We cannot allow this to stand."