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By Liz Crampton
The Justice Department asked the U.S. Supreme Court not take up a case evaluating the legality of American Express Co.’s contracts with merchants, arguing that the key legal question needs to be vetted more by lower courts.
A group of 11 states, led by the Ohio attorney general’s office, appealed a federal court’s decision allowing American Express to bar merchants from steering customers to lower-priced credit cards. In June, the Justice Department opted not to appeal the ruling from the U.S. Court of Appeals for the Second Circuit while the states carried on.
The acting solicitor general’s brief arguing against a Supreme Court review, filed Aug. 7, is the first time the federal government has explained why it didn’t pursue an appeal of a major court loss.
The government still believes the Second Circuit got it wrong by ruling that the DOJ should have examined how AmEx’s rules impact each side of a two-sided market consisting of merchants and customers. But, the brief said, neither the Supreme Court nor circuit courts have “squarely considered” the application of antitrust laws to two-sided markets. For that reason, the high court shouldn’t accept a petition for writ of certiorari.
“The court of appeals seriously departed from sound antitrust principles, and its decision leaves in place restraints that thwart price competition in an important sector of the economy and inflate the retail prices paid by all consumers,” the brief said.
“Consistent with its usual practice of awaiting further percolation in the lower courts before taking up such novel legal issues, the court should deny review here,” the government said.
A spokesman for the Ohio attorney general’s office declined to comment.
At least two cases involving two-sided market questions are pending in lower courts and could provide further examination of the issue the Justice Department thinks the Supreme Court needs.
First, in a North Carolina federal court, the Justice Department is litigating another anti-steering case against a Charlotte health care system. In that case, the government argues that both insurers and patients are harmed by provisions in contracts between insurers and the Carolinas Health System that keep insurers from telling consumers about lower-priced care offered at competing providers. The health system has responded that there’s nothing anti-competitive about the provisions, and its contracts are no different from those offered by other health care providers.
That case is set to go to trial in 2018.
Second, the Second Circuit will revisit the two-sided markets issue when it considers an appeal from airline booking service Sabre Corp. of a $15 million jury verdict awarded to American Airlines Group Inc. The airline accused Sabre of harming competition and inflating booking fees. Sabre said the jury’s analysis is too simple. The market in question is two-sided because the booking service pays incentives to travel agents on one side of the market and charges airlines a fee to cover the cost of those incentives on the other side.
Citing the American Express decision, Sabre argues the verdict against it should be reversed because “no reasonable jury” could have concluded that the market was one-sided, as American Airlines claimed.
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