AmEx Loses Major Merchant & Major Loss In Court

American Express Credit Card

AmEx customers with a Costo American Express card have some bad news in store for them. Costco Wholesale has ended its 16-year relationship with the credit card provider. They’re reportedly on the lookout for a partnership with a new credit card provider. The Costco AmEx has ended, and will no longer be accepted at Costco warehouses across the nation. A federal judge brought a ruling against the company, saying that certain AmEx provisions violate antitrust laws, according to the Motley Fool blog.

The federal court decided that part of American Express’ contract with merchants is known as a “nondiscrimination provision.” That means higher prices and less competition. The clause was created for retailers to treat all credit card providers fairly without picking favorite companies.

American Express charges retailers a greater percentage from each sale than its competitors, according to the New York Times. That means it charges 1 percent more than Visa and MasterCard. The federal court also ruled that this unfair practice led merchants to pass the costs onto its customers.

The judge stated that “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 in the form of higher retail prices.”

AmEx didn’t handle this news very well. It took issue with the federal judge’s decision, saying that it “would harm competition by further entrenching the two dominant payment networks, Visa and MasterCard. Only a small percentage of Visa and MasterCard holders carry American Express cards. By contrast, most American Express card members carry a competing card in their wallet,” the company said in an open statement last week.

AmEx also stated that losing this case could result in a “material adverse effect” on its operations and partnerships with other merchants. The credit card provider has been through some difficult times, says the Bloomberg View. AmEx recently lost its partnership with JetBlue, and has found themselves in a recent court battle. And in late January, the Inquisitr reported that American Express moved its operations to Cuba after cutting 4,000 jobs in the U.S. and internationally.

Some consumers and business writers believe that American Express’ business will have to be rebuilt in order to succeed. The ongoing drama of AmEx may find itself in a new predicament, if it doesn’t prevail. But there is still hope that the company could triumph this battle without losing all of its merchants and consumers.

What do you think of American Express’ costly fees and charges? Has it made you want to cut ties with AmEx and its partnered merchants?

[Image: AIR FORCE ONE/Flickr]