Term: 2017
Docket: 16-1454
Ohio v. American Express Co.
- Pro
16-1454 OHIO V. AMERICAN EXPRESS CO. DECISION BELOW: 838 F.3d 179 CERT. GRANTED 10/16/2017 QUESTION PRESENTED: This case asks how Section 1 of the Sherman Act, which bans unreasonable restraints of trade, applies to "two-sided" platforms that unite distinct customer groups. Such platforms are ubiquitous, ranging from eBay (serving buyers and sellers), to newspapers (serving readers and advertisers). Here, credit-card networks bring cardholder customers together with merchant customers for ordinary transactions. When doing so, Respondents American Express Company and American Express Travel Related Services Company ("Amex'') contractually bar merchant customers from steering cardholder customers to credit cards that charge merchants lower prices. Applying the "rule of reason," the district court held that: (1) the Government proved that Amex's anti-steering provisions were anticompetitive because they stifled competition among credit-card companies for the prices charged to merchants, and (2) Amex failed to establish any procompetitive benefits. The Second Circuit reversed. It held that, to prove that the anti-steering provisions were anticompetitive (and so to transfer the burden of establishing procompetitive benefits to Amex), the Government bore the burden to show not just that the provisions had anticompetitive pricing effects on the merchant side, but also that those anticompetitive effects outweighed any benefits on the cardholder side. The question presented is: Under the "rule of reason," did the Government's showing that Amex's anti-steering provisions stifled price competition on the merchant side of the credit- card platform suffice to prove anticompetitive effects and thereby shift to Amex the burden of establishing any procompetitive benefits from the provisions? LOWER COURT CASE NUMBER: 15-1672
In the case of Ohio v. American Express Co., 2017, the U.S. Supreme Court ruled in favor of American Express (Amex). The issue at hand was whether Amex's anti-steering provisions - which prevent merchants from encouraging customers to use credit cards that charge lower fees - violated federal antitrust laws. A group of states led by Ohio argued that these rules stifled competition and resulted in higher prices for consumers. However, Amex countered this argument by stating its business model justified such restrictions as it competed with other card networks like Visa and MasterCard for both merchants and cardholders simultaneously. The Supreme Court agreed with Amex's two-sided market argument, ruling 5-4 that because there was no evidence showing increased costs on both sides of the platform or reduced quality or quantity of credit card services, there wasn't a violation under antitrust law standards.
In the dissenting opinion for Ohio v. American Express Co., Justice Breyer, joined by Justices Sotomayor and Kagan, argued that the majority's decision to uphold anti-steering provisions in Amex's contracts with merchants was incorrect. The dissenters believed these provisions violated antitrust laws as they stifled competition among credit card companies. They disagreed with the majority’s definition of a two-sided market and its conclusion that evidence of price increases on one side (merchants) could not prove an anticompetitive effect without proof of harm to both sides (including cardholders). In their view, this approach ignored established principles of economics and antitrust law which focus on interbrand competition - competition among all sellers or providers regardless if it is a single or multi-sided platform. Furthermore, they criticized the Court for failing to consider how anti-steering provisions prevented competitors from entering or surviving in the market. Lastly, they warned that this ruling would make it significantly more difficult for plaintiffs to successfully challenge monopolistic practices under Section 1 of Sherman Act.
