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By Liz Crampton
The Justice Department must soon decide whether it wants to ask the U.S. Supreme Court to review a lower court ruling rejecting the government’s antitrust claims against American Express Co. ( United States of America v. American Express Company, 2d Cir., 15-1672, 9/26/16 ).
The stakes are high because the Justice Department rarely loses in an appeals court on antitrust claims, and a new legal theory on multiple customer bases is on the line.
At issue is a practice that impacts most of the retail economy—the government’s claims that AmEx illegally stopped merchants from asking customers to use cheaper credit cards like Mastercard or Visa. Mastercard and Visa both settled with the DOJ over similar allegations in 2011.
Adding to the pressure, the nominee to head the antitrust division, who will weigh in on whether the DOJ should seek review, hasn’t had a date announced for a Senate confirmation hearing.
The antitrust assistant attorney general nominee, Makan Delrahim, might not assume his role before the Justice Department’s May 5 deadline to appeal for Supreme Court review. Patricia Brink, the antitrust division’s director of civil enforcement, said agency officials requested the extension “to allow the new leadership to consider” its position. The justices granted an extension of the DOJ’s deadline to file on March 24.
The DOJ on April 5 moved closer to installing permanent Trump administration officials in the antitrust division by naming Andrew Finch to lead it until the Senate confirms Delrahim. Upon Delrahim’s confirmation, Finch will move into the number two spot. Finch most recently was an attorney at Paul, Weiss, Rifkind, Wharton & Garrison LLP.
John Briggs, an antitrust partner at Axinn Veltrop & Harkrider LLP, told Bloomberg BNA he finds it “unusual” the DOJ wants to wait for newly installed department heads to state its position on the AmEx case.
“I would have thought it would be a no-brainer that the Justice Department would seek cert on the case,” Briggs said. “The fact that they needed to take a time out to seek new management on the case strikes me as interesting.”
“They’ve got a story to tell and I would think they want to tell it to the Supreme Court,” he said.
The Justice Department declined to comment about why it sought to extend the deadline.
The case began in 2010 when the DOJ sued over AmEx’s rules barring merchants from steering customers to lower priced options like Visa and Mastercard. A district court ruled for the Justice Department in February 2015, finding that the rules constituted an unreasonable restraint on trade and resulted in higher prices for consumers.
But in September, an appellate panel of judges said the lower court got it wrong by only considering the interests of merchants, which are just one side of a two-sided market that also includes cardholders. The Justice Department had argued that it only needed to show harm to competition “in general,” according to the appeals court.
If the Supreme Court accepts the AmEx case, it will take a look at the government’s definition of the market. “How one looks at the competitive effects in a two-sided market is a relatively new adventure in law and economics,” Briggs said.
The appellate court’s reversal is significant because the government rarely loses cases based on its market definition, said Theodore Voorhees, an antitrust attorney at Covington & Burling LLP, at an American Bar Association antitrust conference held March 28-31. “This is a huge question,” he said.
The ABA has weighed in formally on the issue, saying in its presidential transition report that two-sided markets have not received “sufficient attention.” The AmEx ruling shows the “increasing importance” of these markets and “the need for clarification” of the right legal standards and analysis, the report said.
The report, drafted by a group of prominent antitrust lawyers, recommended that antitrust officials ask courts to examine the effect of alleged anticompetitive conduct on the market as a whole instead of just the effects on the defendant’s customers.
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