Dive Brief:

• American Express’s policy of preventing retailers from guiding customers to less expensive forms of payment is “an unlawful restraint on trade,” a federal judge ruled Thursday.

• American Express fees to retailers tend to be higher than those of Visa, MasterCard, Discover, and other credit card companies. 

• AmEx said it was disappointed by the ruling and would appeal.

Dive Insight:

While customers technically don’t get dinged with credit-card fees — the retailers do — those costs end up in the prices of goods and services. Federal Eastern District of New York Judge Nicholas G. Garaufis in his opinion said that because American Express was preventing retailers from steering customers to lower-cost options, the company was getting in the way of the free market. Essentially, the company is forcing higher prices onto consumers.

American Express had argued that its policy actually protected customers who would otherwise be under pressure to use a card they didn’t want to use. But the judge wasn’t buying that. His ruling caps a bad month for the company, which learned last week that Costco and Jetblue are ending their AmEx partnerships.

This ruling could empower retailers to negotiate better deals with American Express, says antitrust lawyer Jeffrey I. Shinder, and retailers like Ikea, Sears, and Crate & Barrel in testimony in the case. But it’s not clear what retailers are going to do with their new power, especially in the dawning mobile payments age. They could suggest lower-priced payment options or even charge more to AmEx users. But is that likely?

“It is a good question as to whether merchants are going to do this or not,”  Shinder told the New York Times. “But I can tell you that from Amex’s testimony, it has signaled that it is definitely afraid of the competitive pressure that this will put on its pricing model.”