Stay current on the latest developments from agencies including the CFPB, Federal Reserve, FDIC, and OCC to advise clients on real-life regulatory situations.
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 .
To contact the reporter on this story: Liz Crampton in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Fawn Johnson at email@example.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)