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The federal court's ruling against Amex may not have its desired effect of reducing prices for consumers. Andrew Sorkin's article provides a nice summary of the logic behind the ruling. Amex is challenging the court's decision that its "nondiscrimination policy" is hurting consumers by not allowing retailers to steer customers to their preferred (and often cheaper) payment method.
The court ruled that a part of American Express’ contract with merchants known as a “nondiscrimination provision” had led to less competition, not more, and pushed consumer prices higher. That clause was intended to make merchants treat all credit cardholders similarly without favoring one card company over another. Because American Express charges merchants a higher percentage of each sale than its competitors — broadly speaking, about 1 percent more of the sale than Visa and MasterCard — the court determined the practice led retailers to pass the higher cost onto all customers. As a result, the judge contended, “a lower-income shopper who pays for his or her groceries with cash” or a debit card “is subsidizing, for example, the cost of the premium rewards conferred by American Express on its relatively small, affluent cardholder base...
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