This past Monday, the Supreme Court ruled that financial services company American Express (AXP  ) did not violate antitrust laws by including a clause in its merchant contracts requesting that they do nothing to incentivize patrons to pay with other, possibly cheaper, cards. Merchants often try to do so to cut credit card swipe fees. The decision does not prevent merchants from encouraging payment methods that do not involve credit cards.

The 5-4 decision won with the help of the court's current conservative majority. In the ruling, Justice Clarence Thomas said that that government enforcers are focusing too narrowly on the swipe-fees that merchants have to pay American Express when customers pay with their card. He argued that American Express should be evaluated more broadly by taking into account the fact that their consumers enjoy "a more robust rewards program, which is necessary to maintain cardholder loyalty and encourage the level of spending that makes AmEx valuable to merchants."

The case was brought forward after the federal government and a group of states sued American Express for violating antitrust law. A federal trial court judge initially ruled against American Express, concluding the the clause curbed competition. But an appeals court reversed this decision to rule, and the case was ultimately brought to the Supreme Court for resolution.

While American Express has historically charged higher fees than competitors - around 2.4% of a transaction's price, compared to the average rate about 1.8% to 2% - it has justified this to merchants on the grounds that their customers tend have higher incomes and consequently spend more, offsetting the higher swipe fees. American Express also offers its customers rewards and other perks.

American Express has also been lowering fees in recent years to attract smaller businesses and get more merchants to accept its cards. Around 9 million US locations accepted American Express cards as of 2017, while roughly 10.9 million accept Visa and Mastercard. Stephanie Martz, general counsel at the National Retail Federation, stated that "by denying merchants the right to simply ask for another card or offer an incentive for using a preferred card, the Supreme Court has undermined the principle of free markets where one company should not be allowed to dictate the practices of an entire industry in order to protect its business model."

This ruling provides a resolution to nearly a decade of litigation and protects American Express' business model. If American Express lost, merchants would have had much more leverage over the company.

Had American Express lost, this would have given merchants great leverage against the company. Instead, this is a setback for merchants. The 2010 Dodd-Frank Act capped debit card fees, but credit card fees have no such restrictions.

The ruling could also impact how antitrust enforcers evaluate major companies, such as Facebook (FB  ) and Alphabet (GOOGL  ), who also conduct business with both end-use customers and merchants. The decision could have ramifications beyond the credit card industry if it makes it harder for the government to call out competitive abuses. Because the Us market is highly dependent on credit cards, this ruling will likely have a major impact.