Bloomberg Law
Free Newsletter Sign Up
Bloomberg Law
Advanced Search Go
Free Newsletter Sign Up

Cravath Puts Its Stamp on Antitrust World With Recent Wins

July 31, 2018, 7:22 PM

A firm with as much history as Cravath, Swaine & Moore tends to be modest even when it lands a major victory—say, one at the U.S. Supreme Court. But when it notches two seismic wins in a row, a bit of bragging seems natural.

The firm’s victories came in major antitrust cases for American Express and Time Warner. The firm, characteristically low profile, attributes the outcomes to its long-established way of lawyering.

“The firm has been in the antitrust space for a long time,” Evan R. Chesler, a 42-year firm veteran who argued the American Express case before the Supreme Court, told Bloomberg Law. “We took our 150-year-old antitrust experience and applied it to a 10-year-old case. We used long-standing legal principles and applied them to a new problem.”

Chesler and other Cravath partners, in a series of interviews, credited the collaborative model the firm has followed for decades—largely eschewing lateral hiring—as underpinning the victories. Lawyers, like Chesler, are typically hired out of law school, and trained and paid in lockstep.

There are always setbacks, to be sure. A federal judge’s recent approval of the AT&T and Time Warner merger is being appealed by the government.

But the appeal looks like a long-shot, and Cravath believes that the victories solidify its reputation as a go-to firm for complex antitrust cases.

“I’m a product of a system where everyone rows in the same direction,” said Chesler, who was the firm’s presiding partner for six years and has been its chairman since 2013.

Two-Sided Market

American Express turned to Cravath after the Justice Department and 17 states contested the card provider’s requirement that merchants doing business with them not steer customers to other card issuers who might offer discounts or lower fees to process purchases.

“This is a case that went to the heart of the company’s business,” Chesler said. “And American Express trusted us with this ‘bet-the-company’ litigation that began with a government investigation and culminated in my arguing their side at the Supreme Court”—a first for Chesler, despite a long and varied career as a litigator.

Visa and Mastercard, which control a larger share of the card market than American Express, were also sued and quickly settled the charges against them. But American Express saw the case as potentially upending its business model, which depends on revenue from higher swipe fees, and decided to press on alone. At the time, its chief executive Kenneth Chenault went public to explain its decision. The company, he said, was fighting for consumer choice and free market competition.

But, as Chenault predicted, it would be a long and costly battle. Cravath began studying the economic literature to settle on an economic strategy for the defense—and the lawyers all needed to agree.

“We work as a team. We all talk to each other a lot; we make sure we’re aligned on strategy. That’s bedrock for our culture,” explained Peter T. Barbur, a Cravath litigation partner who played a significant role in the case.

Cravath argued that American Express operates in a two-sided market—it provides payment processing services to merchants, financial services to cardholders, and settles transactional disputes between the two.

And you can’t prove anticompetitive effects without looking at both sides of the market—merchants and cardholders—Cravath argued. The Supreme Court agreed.

The plaintiffs’ argument, the Supreme Court said, “wrongly focuses on just one side of the market. Evidence of a price increase on one side of a two-sided transaction platform cannot, by itself, demonstrate an anticompetitive exercise of power.”

Though American Express charged merchants higher fees, its antisteering policy didn’t result in fewer credit card transactions or hinder competition between credit card companies, the court held.

“We knew the company’s issues well because there had been other suits by merchants, mostly antitrust, and we knew the two-sided market approach could work,” said Barbur, who continues to represent American Express in several other antitrust lawsuits.

“We didn’t reinvent the wheel but we took an existing principle and applied it to some big litigation.”

Ruling 5-4 in June, the Supreme Court said American Express’s practice has “spurred robust interbrand competition and has increased the quality and quantity of credit-card transactions.”

And the two-sided market argument has carved out some new ground, according to a consumer watchdog group.

“The Supreme Court has moved the law significantly against government enforcement, but cases tend to be quite complex factually so outcomes are different,” said Gene Kimmelman, a veteran lawyer and chief executive of the consumer advocacy group Public Knowledge.

“Now every time there is a challenge,” he said, “there will be an effort to say the market is two-sided.”

AT&T, Time Warner

In the Time Warner case, Cravath relied on a traditional legal defense to defeat the government’s contention that a $85 billion-plus merger between Time Warner and AT&T would harm consumers. The government sought to block the deal that promised to fold major media names like CNN and HBO into AT&T, a distribution powerhouse. The dispute took on an aura of a titanic clash when the White House spoke out against the combination.

“We had to look at how the market functions,” said Kevin J. Orsini, a Cravath partner who worked on the merger trial, which lasted six weeks last spring. “The government contended that AT&T would use ownership of Time Warner to increase consumer prices.”

The combination, Cravath noted, was a vertical merger where Time Warner provides content, which is complementary to AT&T’s distribution channel.

“We argued that the merger could enhance the way people consumed content,” Orsini noted.

Vertical mergers typically survive challenges or are not challenged at all because they are seen as not impinging on consumers.

In his June ruling allowing the merger, Judge Richard J. Leon of the U.S. District Court for the District of Columbia, found the government had not proved that combining the two companies would be anticompetitive and allowed AT&T to move ahead to deliver Time Warner content through its cable, direct TV or streaming options. Time Warner is now called Warner Media.

Though it is unclear whether Chesler and his colleagues would be part of the appeal—O’Melveny & Myers represented AT&T through the merger process—they didn’t want to label their victories too broadly in the two cases.

Cravath’s website had no such hesitation, however, in describing the Time Warner win as “historic.” The American Express case, it says, is “one of the most significant government antitrust enforcement actions in history.”

To contact the reporter on this story: Elizabeth Olson in Washington at

To contact the editor responsible for this story: Tom P. Taylor at