American Express to Cut Fees to Some Merchants : Credit: The company is trying to improve relations with businesses that complain about high processing charges.

American Express Co. said it will reduce the fees it charges some merchants for processing credit transactions, moving to halt defections and patch up relations with businesses that accept its card.

The step is a reversal for American Express, which staunchly refused to negotiate lower fees in the past. Such refusals had caused a number of well-known businesses to drop the card, including Carnival Cruise Lines and the London-based Laura Ashley chain of women’s clothing stores.

American Express charges merchant fees that are in some cases twice as high as those levied by rivals Visa, MasterCard and Discover. These competitors have made small but significant inroads into American Express’ business as merchants look for ways to reduce costs in a recession.

In the past, American Express said its fees were justified because it gave merchants better marketing support than its competitors. But in a speech to 2,000 travel agents in Orlando last Friday, American Express President Harvey Golub acknowledged that its fees had caused problems with businesses.

“Our value was not high enough to justify our premium price in the eyes of our (merchants),” he said.

American Express declined to say how it would determine which merchants qualify for a revised rate. In his speech, Golub said, “In cases where value is not present, we’ll selectively lower discount rates. Where value is there and we can prove it, we may increase prices.”

The fee is an important revenue generator for American Express because it doesn’t collect interest from card holders on credit balances. But an American Express spokeswoman said the rate adjustments would affect few merchants and the impact on the company’s revenue would be small.

Michael A. Lewis, an analyst with Dean Witter in New York, said American Express told analysts that fee adjustments would shave $130 million from revenue, or about 4% of what it took in last year from fees.

The reaction among merchants was mixed. While some welcomed the move, others, including Michael Weinstein, president of New York-based restaurant chain Ark Inc., were skeptical. “I don’t know what ‘selectively’ means,” said Weinstein, who is seeking a rate reduction. “It is too vague for me to determine how I benefit.”