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UPDATE 1-U.S. judge: Government's antitrust suit vs AmEx may proceed

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NEW YORK, May 7 (Reuters) - A lawsuit brought by the U.S. Justice Department and several states against American Express Co over the credit card company's rules imposed on merchants can move forward to trial, a U.S. judge ruled on Wednesday.

The lawsuit, filed in 2010, charged that American Express' rules prevent merchants from offering discounts and incentives to consumers to use less expensive forms of payment.

U.S. District Judge Nicholas Garaufis of Brooklyn said that "genuine issues of material fact remain in dispute," according to his written ruling.

American Express did not immediately respond to a request for comment.

Merchants spend more than $40 billion a year on networks that let them accept credit cards from American Express and its rivals, according to the government. On average, merchants spend the most on accepting American Express cards, the government says.

The government contends that American Express' rules prevent price competition among credit card companies.

In requesting that the case be dismissed, American Express had argued that the government could not show it had significant market power.

But in his ruling, Garaufis concluded that the government did not have to prove market power to make a successful antitrust claim.

The government could alternatively show that American Express' conduct had an "adverse effect on competition," Garaufis ruled.

The Justice Department also sued Visa Inc and MasterCard Inc in 2010 over their rules, but both companies settled immediately.

The case is United States of America, et al v. American Express Co, U.S. District Court for the Eastern District of New York, No. 10-04496.

(Reporting by Andrew Longstreth; Editing by Jan Paschal)

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