June 25, 2018
Ohio v. American Express Co., No. 16-1454
Decided June 25, 2018
The Supreme Court held 5-4 that plaintiffs challenging American Express (“Amex”) credit-card rules for merchants did not prove an antitrust violation because their evidence focused on only one side of the relevant market (the effect of Amex’s rules on merchants) while ignoring the other side (the effect on cardholders).
To compete in the market, credit-card companies need a critical mass of both consumers holding their card and merchants who are willing to accept it for payment. Amex offers cardholder reward programs to encourage cardholders to use its cards. To fund those programs, Amex charges merchants higher fees than other credit-card companies. To sustain this business model, Amex’s merchant agreements contain “anti-steering” provisions that prohibit merchants from encouraging cardholders to use other, lower-fee cards at the point of sale. The federal government and 17 states brought an antitrust suit under the Sherman Act, 15 U.S.C. § 1, arguing that these provisions unreasonably restrain trade.
Whether plaintiffs could prove an antitrust violation by showing that Amex’s anti-steering provisions caused merchants to pay higher prices.
“[C]ourts must include both sides of the platform—merchants and cardholders—when defining the credit-market.”
Justice Thomas, writing for the 5-4 Court
No; because both merchants and cardholders participate in the same “credit-card transaction market,” plaintiffs could not prove an antitrust violation based solely on evidence that Amex’s anti-steering provisions increased the price to merchants without considering the net effects on the market as a whole.
What It Means:
This decision raises the threshold for antitrust plaintiffs, whether private or governmental, in challenging potentially two-sided platforms. These platforms have recently become substantial parts of the economy.
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