Free Enterprise - The FindLaw Small Business Law Blog

What the American Express Decision Means for Small Business

Small businesses across the country are likely wondering whether or not they should be dropping American Express after the Supreme Court's recent decision in the credit giant's favor. If you care about the company's share price, that might not be a smart move, but if you're not invested, then it's a bit different.

That case centered on whether Amex's standard practice of requiring retailers to not promote other cards, or steer shoppers to use other credit cards, like Discover or Visa, resulted in an antitrust violation for anti-competitive behavior. Most small businesses are already aware of the fact that American Express charges higher swipe-fees, but for those who decide to swallow that swipe-fee pill, the anti-steering provisions can often feel like discovering that spoonful of sugar was really salt.

Raising Prices or ...

According to the case that challenged Amex's anti-steering provision for merchants, the challengers alleged that the practice causes increased costs for goods and services to get passed on to consumers. And if you're wondering why merchants even accept Amex, well, the Supreme Court explained it succinctly: Amex card holders are, on average, wealthier. And businesses, small and large, will always cater to the wealthy.

But, as the challengers contend, because of this, merchants that accept Amex are faced with higher costs on average, which get passed along to all consumers equally.

Exclusive to a Fault

While American Express may have the wealthier base, merchants that are faced with the choice between not accepting the card and raising fees might want to just consider ditching the platform for alternative payment options. For example, opting to accept Google Wallet, or Apple Pay, or even Bitcoin or other cryptocurrencies, could provide just as much of an attraction as a niche credit card like Amex. Additionally, for most Amex card holders, it is not their only card, so businesses are not likely to lose out on business by stopping acceptance of the card.

However, businesses that do plan to tell their consumers to leave their Amex card at home might want to plan some lead-time on doing so for a couple reasons:

1. If customers are planning a big purchase and want to take advantage of the Amex points and perks, they may be disappointed or even look elsewhere.

2. If you have customers on recurring payments, and some have their Amex linked to the account, you do not want to risk having a payment bounce and dealing with the customer relations issue that ensues.

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