American Express can keep high-fee pacts,

U.S. had sued over anti-steering deals; retailers blast 5-4 decision.

The Supreme Court threw out a government lawsuit that accused American Express Co. of thwarting competition by prohibiting merchants from steering customers to cards with lower fees.

The justices, voting 5-4 along ideological lines, said the U.S. government and 11 states failed to prove that the American Express rules harmed cardholders as well as merchants.

The case was being closely watched in Silicon Valley because of the prospect it could insulate tech giants like Facebook and Amazon.com from some antitrust suits.

The ruling preserves American Express’s high-fee business model and deals a blow to retailers looking to reduce the $50 billion in fees they pay to credit-card companies each year. It’s a defeat for Discover Card Services, which said the rules undercut its ability to compete with American Express. Discover fell slightly more than 1.5 percent.

Writing for the court, Justice Clarence Thomas said the government “did not offer any evidence that the price of credit-card transactions was higher than the price one would expect to find in a competitive market.”

American Express called the ruling a “major victory” for consumers as well as the company. “It will help to promote competition and innovation in the payments industry,” the company said in a statement.

The high court dispute turned on what antitrust lawyers call a “two-sided market.” In a twosided market a company sells products or services to two distinct but interrelated groups of customers — merchants and cardholders, in American Express’s case.

Antitrust enforcers said American Express uses its leverage over merchants to thwart competition from cards that would charge retailers lower fees. American Express’s agreements with retailers contain an “anti-steering” provision that bars them from doing anything to encourage the use of competing cards, such as offering discounts.

The Justice Department and states said the effect is to ensure that retailers will continue to pay high fees and to thwart rivals like Discover, which tried in the 1990s to adopt a low-cost business model.

Writing for the dissenters, Justice Stephen Breyer said American Express was demanding “contractual protection from price competition.”

Because of the anti-steering

policy, “consumers throughout the economy paid higher retail prices as a result, and they were denied the opportunity to accept incentives that merchants might otherwise have offered to use less-expensive cards,” Breyer wrote. He took the unusual step of reading a summary of his dissent from the bench for emphasis.

Retail groups said they were disappointed.

“Today’s decision is a loss for American consumers,” said Deborah White, general counsel of the Retail Industry Leaders Association. “The court’s decision to uphold the Second Circuit’s misguided approach ... will allow AmEx to continue to stifle competition and prevent consumers from understanding the cost of rising credit card fees.”

Thomas said antitrust enforcers failed to account for the cardholder rewards funded by American Express’ merchant fees.

“AmEx’s increased merchant fees reflect increases in the value of its services and the cost of its transactions, not an ability to charge above a competitive price,” Thomas wrote.

The lawsuits originally targeted Visa and Mastercard over their anti-steering policies as well. Those two companies settled the