American Express’ network rules have deterred Discover from using lower interchange rates to lure more merchants, a high-ranking Discover executive testified in federal court July 10.

Roger Hochschild, Discover's president and COO, said American Express' anti-steering rules create a “vicious circle” which prevents retailers from encouraging customers to use lower-cost cards. “In an environment where networks with market power can keep increasing their rates for merchants, they can use some of that money for profits,” Hochschild said during a trial on American Express' card fees. “In essence [it's] taking the merchant’s money, and using it against them.”

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