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

The justices, voting 5-4, said the U.S. government and 11 states failed to prove that the American Express rules harmed cardholders as well as merchants. American Express jumped as much as 2.95 percent in New York. Visa Inc. slipped as much as 2.4 per cent, and Mastercard Inc. fell as much as 2.3 per cent.

"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," Justice Clarence Thomas wrote for the court. The case divided the court along ideological lines, with the four Democratic appointees dissenting.

The ruling preserves American Express’s high-fee business model and deals a blow to retailers looking to reduce the US$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.

"The Supreme Court’s decision is a major victory for consumers and for American Express," an American Express statement said. "It will help to promote competition and innovation in the payments industry."

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

The case is Ohio v. American Express Co., 16-1454.