AmEx Defends Appeals Court Win to Supreme Court

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By Liz Crampton and Eleanor Tyler

American Express Co. told the U.S. Supreme Court that a federal appeals court correctly rejected antitrust allegations levied against the company by the Justice Department and several state attorneys general and encouraged the high court not to take the case.

In a brief filed late Aug. 21, obtained by Bloomberg BNA, American Express said that the U.S. Court of Appeals for the Second Circuit was right to dismiss the government’s case against AmEx rules that bar merchants from steering customers to cheaper credit cards. American Express added that the law governing multi-sided markets like its credit card network is too new to warrant Supreme Court guidance.

Two-sided markets bring two or more different customer types together. Platforms like AmEx’s credit card network match the two sets of customers — merchants and cardholders in this case — more efficiently. In the process, they might provide services to one side of the market for free to attract enough of those participants to make the platform valuable for the other set of customers.

The Justice Department abandoned the appeal in June and then weighed in against the petition for Supreme Court review filed by 11 states. Those states originally sued with the DOJ to block AmEx from enforcing its merchant rules.

‘Poor Candidate for Review’

“This case is an especially poor candidate for review,” AmEx argued in its brief, saying it contains none of the normal hallmarks of a vital high-court legal dispute. There was no disagreement within the Second Circuit, and no other circuit court has ruled on a similar two-sided market case, the company said.

American Express agreed with the DOJ’s conclusion that the legal questions would benefit from “additional percolation in the lower courts” before the Supreme Court addresses “application of general antitrust principles to two-sided platforms and to agreements of the sort at issue here.”

The states argued that the Supreme Court should review the AmEx case because of an increasing need for guidance on the “rule of reason” antitrust legal standard the Second Circuit used. That standard often requires extensive analysis of a certain conduct’s impacts on a relevant market, as opposed to the “quick look” or “per se” theory of liability.

Additionally, the states said the appeals court’s insistence that enforcers must view each side of a two-sided market separately is a departure from the test the court has “long used.”

“Rather than apply the established market-definition test, the Second Circuit adopted a new one,” the appeal stated.

The Ohio attorney general, which is taking the lead in the states’ appeal, has declined to comment beyond the states’ brief to the Supreme Court.

Long Legal Battle

AmEx’s brief is the latest development in a legal battle that began in 2010, when the Justice Department argued against the rules for merchants. Siding with the government, a district court in 2015 found that American Express’s rules constituted an unreasonable restraint on trade and resulted in higher prices for consumers.

But that decision was overturned by the Second Circuit last year when the panel of judges held the government was wrong to only consider how the rules impacted merchants, which are just one side of a two-sided market that also includes cardholders.

American Express now says the Supreme Court should decline this case because the two-sided markets question it presents has hardly been touched by the lower courts, and there isn’t a clear conflict.

“In the long term, if the antitrust issues arising from two-sided markets prove controversial and recurring, this court will have future opportunities to review them,” the brief states.

American Express also says this case is a poor vehicle for exploring the legal questions of two-sided markets because the government failed to prove that it overcharged merchants in the first place, evidence that is pivotal to an antitrust claim.

To contact the reporter on this story: Eleanor Tyler in Washington at etyler@bna.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bna.com

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