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By Liz Crampton
Wal-Mart Inc., Discover Inc., Jack in the Box Inc., and liberal think tanks all agree that the U.S. Supreme Court should slap down a federal appeals court decision siding with American Express Co. and how it treats retailers.
The companies and groups are part of a diverse coalition that’s filed 14 amicus briefs opposing a U.S. Court of Appeals for the Second Circuit ruling that allowed American Express to maintain rules that prevent merchants from telling customers about cheaper credit cards offered by competitors.
American Express has no one in its Supreme Court corner so far. The deadline to submit amicus briefs in favor of American Express is Jan. 23.
Early next year, the high court will hear arguments about the Second Circuit’s decision to throw out the lawsuit because the Justice Department failed to prove that the American Express rules harmed both cardholders and merchants. The justices are considering what kind of analysis is needed in multi-sided markets with more than one group of customers.
A lot is on the line, and it’s not just about credit cards. The court’s decision could reach all parts of the retail economy and extend to other industries, like health care and technology, that serve distinct groups.
The briefs filed against American Express take a range of positions — the court applied the wrong standard, it didn’t take into account the rules’ competitive effects, or it departed from a traditional approach — but the premise is the same. They all say the Second Circuit ruling should be overturned.
AmEx, on the other hand, has argued that merchant fees help pay for cardholder rewards and that antitrust regulators didn’t account for those benefits.
A decision in favor of the Second Circuit’s ruling would risk immunizing dominant tech platforms like Facebook Inc. and Google Inc. from effective antitrust review, the public interest group Open Markets Institute argued in its brief.
Facebook and Google serve two distinct customer bases — users and advertisers — to the mutual advantage of their bottom lines. The Open Markets Institute was formed specifically to combat dominant firms like this that it says escape traditional antitrust scrutiny.
The standard for antitrust violations in two-sided markets, outlined by the Second Circuit in the AmEx case, would be difficult to meet, the group said. “Anticompetitive activity would become virtually beyond reach,” the brief said.
American Express argues that the law governing multi-sided markets is too new to warrant Supreme Court guidance.
The Justice Department originally sued to stop AmEx from telling merchants not to discuss cheaper credit cards, but it abandoned the case in June as the antitrust division was in transition with the new administration.
The DOJ then weighed in against the petition for Supreme Court review, saying it disagreed with the Second Circuit’s decision, but it agreed with AmEx that the legal questions need to percolate through the lower courts.
The 11 states that appealed to the high court had joined the DOJ in its suit.
Discover and other lower-priced credit cards stand to benefit if the Supreme Court says AmEx’s rules are invalid.
Nearly 20 years ago, Discover began a discount campaign that notified merchants on its networks of price increases by AmEx and other cards and invited retailers to save money by shifting customers to Discover instead. That plan failed because of AmEx’ rules for merchants.
The district court judge who ruled against AmEx cited Discover’s merchant discount campaign as an example of free-market behavior that would have influenced consumer behavior in a fair way if AmEx hadn’t intervened.
“The district court’s analysis would allow ‘competition,’ not courts or particular competitors, to drive network price and services offerings,” Discover wrote in an amicus brief. “That is the right result.”
Other authors of amicus briefs include antitrust professors and economists, the American Antitrust Institute, Consumers’ Union, and associations of retailers whose members range from Bally Total Fitness to Office Depot.
The case is Ohio et al. v. American Express Co. et al. , U.S., No. 16-1454, cert. granted 10/16/17 .
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