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13 AMERICAN EXPRESS COMPANY | ANNUAL REPORT 2014
As I was finishing this letter, another development took place that I want
to address. A federal court judge announced his decision in the antitrust
lawsuit brought against us by the U.S. Department of Justice. The suit
centered on provisions in our merchant contracts designed to prevent
discrimination at the point of sale.
Unfortunately, the judge ruled against American Express. While this ruling
did not yet address what, if any, changes are required in our merchant
contracts, it did find that our non-discrimination provisions are prohibited
by the Sherman Act. We intend to appeal this decision because we believe
it is wrong and will ultimately harm competition in the marketplace. We will
continue to stand up for our rights and the rights of our Card Members.
Under our contracts, merchants who choose to accept American Express
agree to provide welcome acceptance, not discrimination, when a
customer presents their card to make purchases. The Justice Department
wants to abolish these protections, which they believe hinder competition.
If the Justice Department has their way, merchants who sign a contract to
accept American Express cards could nevertheless pressure customers
to use a dierent card when it’s time to pay.
Rather than settle, we fought this case for several reasons.
First, it’s unfair to allow merchants who have agreed to honor our cards
to then discriminate against American Express and our Card Members.
Second, it’s fundamentally unfair to interfere with a consumer’s right to
choose how he or she wants to pay at checkout. Third, we don’t believe
there would be any benefit to consumers if the government prevails in this
case. Instead, competition would be reduced, which would ultimately harm
both consumers and merchants.
Let me expand on this last point. Visa and MasterCard account for at
least 80 percent of card spending in the U.S. Only a small fraction of Visa
and MasterCard holders carry American Express cards. In contrast,
most American Express Card Members carry a competing card in their
wallet. Because of this marketplace reality, merchants would be able to
steer customers toward Visa and MasterCard, while it would be virtually
impossible to steer away from them. Such an outcome would only further
Department of Justice Lawsuit