American Express Co. was ordered to drop many rules that prohibit merchants from asking customers to use less-expensive credit cards.

The company also can't bar businesses from offering discounts or other incentives to steer customers to other cards, the judge said April 30 as he imposed remedies in a U.S. antitrust case.

U.S. District Judge Nicholas Garaufis in Brooklyn, New York, rejected the company's request to allow merchants to steer customers to other cards only if they can determine which card has higher fees on a transaction-by-transaction basis.

The company doesn't have the right to "force merchants to make such a calculation on the basis of American Express's pre- defined terms," Garaufis said in a memorandum accompanying his order on remedies.

After a seven-week non-jury trial, Garaufis issued a ruling in February finding that New York-based American Express's rules violated antitrust law, marking the first definitive court decision on practices that allow card firms to collect about $50 billion a year in fees from merchants.

The ruling was a third blow to the company after partnerships with Costco Wholesale Corp. and JetBlue Airways Corp. ended.

Andrew Johnson, a spokesman for Amex, said in a statement that the company plans to appeal the judgment.

"We believe it will not provide any benefit to consumers and will in fact harm competition by further entrenching the two dominant networks," he said, referring to MasterCard Inc. and Visa Inc.

Amex has argued that its rules are needed to protect its business model of offering generous perks, which allow it to compete with the other more widely used cards.

The ruling is set to take effect in 30 days, although Amex can seek a delay.

The case is U.S. v. American Express, 1:10-cv-04496, U.S. District Court, Eastern District of New York (Brooklyn).

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