Why Monday’s Supreme Court decision is good news for your credit union

Hello folks. I know I said that I would be dedicating today’s blog to another regulation finalized at NCUA’s Board meeting last Thursday but the Supreme Court decided Ohio v. American Express Company yesterday and I think it’s worth explaining even though Visa and Mastercard were not involved in the decision and many of your members don’t have American Express.

In 2010 the Justice Department sued American Express, Visa and Mastercard. The department alleged, among other things, that the card networks were engaging in anti-competitive behavior by putting language in their merchant contracts prohibiting merchants from steering consumers to cheaper credit cards when making payments. As I’m sure many of you know, these provisions are intended to prevent a merchant from encouraging consumers from using cards that cost the merchant less money in transaction fees. Visa and Mastercard quickly settled, but American Express refused to cave. Perhaps this is because American Express relies on a smaller number of wealthier consumers and their merchant fees tend to be higher compared to other credit cards.

In most but not all anti-trust cases, a key issue is whether a company controls enough of the market to charge higher prices than it would be able to if it had to worry about competition. The merchants argued that the market in which they are competing is a market for credit card networks. In other words, courts do not have to consider the extent to which merchants benefit from increased consumer activity when analyzing anti-trust concerns. If they are right, then they pretty much have proven their case. Remember, all the major companies prohibited merchant steering.

 

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