American Express Wins Antitrust Appeal of ‘Anti-Steering’ Rules

American Express Co. secured its win against antitrust litigation by merchants claiming its payment “anti-steering” rules led other credit cards to raise their rates, when a federal appeals court in Manhattan ruled Monday that the theory’s chain of causation has too many links.

The U.S. Court of Appeals for the Second Circuit upheld a decision by Judge Nicholas G. Garaufis, who dismissed the case in January 2020 from a federal court in Brooklyn, finding that merchants not accepting AmEx aren’t “efficient enforcers” of antitrust claims against it.

Judge Steven J. Menashi, writing for the appeals court, said the lawsuit’s theory—that AmEx eliminated any incentive other cards might have to compete over rates—ran afoul of the “first step” rule for determining whether an antitrust violation is considered the legal cause of its “ripple effects.”

The merchants “were allegedly injured when AmEx’s competitors, covered by AmEx’s price umbrella, raised their own prices,” Menashi wrote. “AmEx restrained trade to raise its own prices; only later did its competitors follow suit.”

Because the merchants were “harmed at that later step, the claims here fail the first-step test,” he added.

Barring another trip to the U.S. Supreme Court—a related case led to a landmark 2018 ruling establishing the “two-sided market” antitrust framework for payment processing cases—the decision concludes anti-steering litigation against AmEx on behalf of merchants that don’t accept its cards.

A parallel proposed class action brought by consumers with a similar “umbrella” theory is still advancing at the trial court level, although Garaufis dismissed about half of its remaining claims in January. Merchants that take AmEx had their case sent to arbitration a year earlier.

The Second Circuit cited those arbitration proceedings Monday, noting that one of the “efficient enforcer” factors asks whether plaintiffs alleging more direct harm are in a position to bring antitrust claims. Merchants accepting AmEx were, and they did, the appeals court said.

Judges Joseph F. Bianco and Denny Chin joined the ruling.

AmEx is represented by Cravath, Swaine & Moore LLP. The merchants are represented by Hausfeld LLP, Reinhardt Wendorf & Blanchfield, and Heins Mills & Olson PLC.

The case is In re Am. Express Anti-Steering Rules Antitrust Litig., 2d Cir., No. 20-1766, 11/22/21.