Retailers Win One, Lose One Before SCOTUS

After ruling that states can force online shoppers to pay sales tax — thus leveling the playing field between brick-and-mortar and ecommerce retailers — the U.S. Supreme Court turned around and ruled, by an identical 5-4 decision, that credit-card giant American Express can continue to prevent retailers from offering consumers benefits, including discounts, for using lower-fee credit cards.

Now, the first ruling makes a lot of sense to me. It is patently unfair to allow online-only retailers to gain a competitive advantage over traditional brick-and-mortar store operators by allowing them to avoid collecting and remitting state sales tax.

I don’t expect this ruling alone will stem the market-share shift from brick-and-mortar retailers to online retailers, but it does give traditional retailers at least a fighting chance to compete on a level playing field.

But if it’s about fair play, I don’t understand how the court could rule in favor of American Express in its latest decision this week. Justice Clarence Thomas, writing for the majority, claimed that because American Express creates "two-sided platforms that differ from traditional markets" and are designed to deal with both consumers and merchants, they are somehow justified in restricting merchants who accept their card from offering consumers discounts for using less costly cards.

Retailers had argued that the rules were anticompetitive, denied consumers accurate information about their credit cards, and prevented customers from receiving benefits that retailers might offer in the absence of those rules, according to the Retail Industry Leaders Association (RILA).

The American Express ruling not only perpetuates a system that costs retailers and consumers billions of dollars a year (credit card transaction fees in the c-store industry increased 6.2 percent last year, according to the 2018 Convenience Store News Industry Report), but also obfuscates the real cost of that rewards card you carry around in your pocket.

If consumers knew how much of the price they pay for gas was due to exorbitant transaction fees, they might voluntarily opt to utilize lower-cost forms of payment — or at least choose a card that charges lower fees to retailers.

I’m not a lawyer, but the Amex policy seems clearly anti-competitive. Retailers should be able to provide transparency into what consumers pay for their products and services. This ruling doesn’t appear to help anyone but American Express.

A convenience store retailer has to seriously reconsider whether accepting Amex is worth it.