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By Liz Crampton
Makan Delrahim, the nominee to lead the Justice Department’s antitrust division, won’t receive Senate confirmation in time to consider whether the government should ask the U.S. Supreme Court to review its loss in a suit challenging American Express Co.’s alleged anticompetitive behavior.
The American Express case is significant because it explores a legal theory that hasn’t been widely tested by courts.The antitrust legal community wants clarification on whether enforcers need to separately analyze both sides of a two-sided market where a company receives revenues from separate groups. American Express receives revenue from both card holders and merchants, which means the case would provide a good vehicle to answer those questions.
The DOJ has until June 2 to file an appeal, and it has exhausted its available authorized extensions. The government was granted those extensions so that it could wait until Delrahim was confirmed and sworn in. The antitrust division is currently being run by Acting Assistant Attorney General Andrew Finch, who will move into the number two spot upon Delrahim’s expected confirmation.
“It’s unclear what the DOJ is going to do on this,” Bloomberg Intelligence analyst Jennifer Rie told Bloomberg BNA. “I would expect them to appeal as it’s a controversial decision, but they obviously want that to be a decision of the new administration.”
The case also marks the DOJ’s first court loss after a long string of victories. The last major court defeat was in district court in 2004 when the DOJ unsuccessfully challenged the merger of PeopleSoft and Oracle Corp. It didn’t appeal the decision.
At issue is a practice that impacts most of the retail economy—the government claims that AmEx illegally stopped merchants from asking customers to use cheaper credit cards. Mastercard and Visa both settled with the DOJ over similar allegations in 2011.
DOJ staff asked the high court for the two extensions to file a writ of certiorari until new leadership can get in place. But Delrahim’s nomination won’t clear the Senate until later this summer. The earliest a committee vote could happen is June 8 during the Senate Judiciary Committee’s next executive business meeting. The nomination then needs to pass the full Senate.
The DOJ sued American Express in 2010 sued over its rules barring merchants from steering customers to lower priced options. The U.S. District Court for the Eastern District of New York ruled for the DOJ in February 2015, finding that the rules constituted an unreasonable restraint on trade and resulted in higher prices for consumers.
But in September, the U.S. Court of Appeals for the Second Circuit 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 card holders. The DOJ had argued that it only needed to show harm to competition “in general,” according to the appeals court.
The lower court judge in the case, Nicholas Garaufis, has had only 11.1 percent of his decisions reversed, according to a Bloomberg Law’s Litigation Analytics.
The American Bar Association earlier this year requested that antitrust officials clarify whether this type of market requires special analysis. The AmEx case “illustrates both the increasing importance of two-sided markets and the need for clarification of the applicable legal standards and appropriate modes of legal and economic analysis,” the ABA said in a report to the new administration.
The report, carefully compiled by prominent antitrust practitioners for each new administration, represents consensus views of the antitrust legal community, which has a close relationship with the DOJ and Federal Trade Commission competition enforcers.
At an ABA conference in March, the antitrust division’s director of civil enforcement Patricia Brink said the agency asked for its first extension “to allow the new leadership to consider” its position.
But the June 2 deadline is final. Under Supreme Court rules, extensions to file a writ of certiorari are limited to a total of 60 days.
The rules caution that these deadlines are ironclad. “This jurisdictional requirement of timeliness is strictly applied in civil cases,” the rules say. “No exceptions or waivers are recognized; no matter how extenuating the circumstances, an untimely petition will not be entertained.”
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