AmEx Wins Antitrust Case on Merchant Rules

American Express Inc. prevailed June 25 when the U.S. Supreme Court agreed with its argument that rules about how merchants should treat cardholders don’t violate antitrust laws.

In a 5-4 opinion, the justices held that the plaintiffs, several U.S. attorneys general, didn’t show anticompetitive effects from AmEx’s rules forbidding merchants to steer customers to credit cards that charge a lower swipe fee than AmEx.

The Justice Department originally sued in 2010, arguing that the practice was anticompetitive. A district court agreed in 2015, but the U.S. Court of Appeals for the Second Circuit reversed in 2016, saying the DOJ hadn’t taken into account both sides of a two-sided market that caters both to customers and merchants.

State attorneys general asked the Supreme Court to consider the case, arguing that markets that serve more than one group of customers don’t require special treatment and should be analyzed like any other market. In this case, the harm is on the merchant side, they argued. AmEx countered that its merchant rules can’t be anticompetitive because they are necessary to benefits consumers want and can’t get another way.

After first stating that the law isn’t developed enough yet for the Supreme Court to weigh in, the DOJ argued with the state AGs that the practice was anticompetitive, once the justices decided to hear the case.

Michael Smith, an information technology professor at Carnegie Mellon University’s Heinz College, told Bloomberg Law before the opinion was issued that two-sided markets are “a big part of our economy and growing every day,” and present problems for traditional antitrust analysis without easy answers. “We need to think carefully about these when it comes to antitrust,” he said, because what we know about them is they tend to be winner-take-all markets.

With so little guidance on how to analyze these platforms, the court’s decision will have enormous impact on how the law develops in these growing markets.

The case is Ohio, et al. vs. American Express, 6/25/18, U.S., No. 16-1454, 6/25/18.