NEW YORK (Reuters) - American Express Co (AXP.N) is set to face off against the U.S. government and 17 states in a trial that begins on Monday over claims that it stifles competition from credit card providers that charge lower processing fees.
At issue in the trial, expected to last two to three months, are American Express rules that bar its millions of merchants from offering incentives for customers to use less-expensive credit cards or cash when making purchases.
Amex, according to the government, charges the highest processing fees on average of any card network. In a pre-trial brief, the government said merchants would testify that they would like to use discounts and other tools to promote competition among the card networks that would help them negotiate lower fees.
Amex asserts that the rules protect customers from price discrimination and have helped promote competition, court papers show.
The U.S. Justice Department and several states sued Amex, Visa Inc (V.N) and MasterCard Inc (MA.N) in 2010. The latter two settled the case the same day it was filed. The states include Michigan, Ohio, Texas, Missouri, Maryland, Arizona and Iowa.
U.S. District Judge Nicholas Garaufis of Brooklyn will preside over the non-jury trial.
Amex claims it commands only 26 percent of the market, as defined by consumer spending. If debit cards are included, as Amex insists, its share would drop to 15 percent.
With such a small market share, Amex argues that it is incapable of harming competition. However, the Justice Department has said it can show that Amex’s behavior had an “adverse” impact on competition, regardless of its market share.
The evidence presented at trial, according to the Justice Department, will show that Amex’s rules prevent credit card networks from competing for merchant business and deny merchants a way to reduce their costs.
The case is United States of America, et al v. American Express Co, U.S. District Court for the Eastern District of New York, No. 10-04496.
Editing by Will Dunham; Editing by Richard Chang