By Jody Coultas, J.D.
The Supreme Court announced today that it will consider a petition brought by 11 states seeking a review of a Second Circuit ruling that the Department of Justice failed to prove that "anti-steering" rules that prohibited merchants who accepted American Express cards from directing customers to alternative credit card brands violated Section 1 of the Sherman Act. This is the first antitrust case to be taken up by the Court this term (State of Ohio v. American Express Company, Dkt. 16-1454).
In 2010, the Justice Department and 17 states filed suit against the country’s three largest credit and charge card transaction networks. A February 2015 decision of the federal district court in Brooklyn, N.Y., in favor of the Justice Department and the states, and an order prohibiting American Express (AmEx) from enforcing these nondiscriminatory provisions (NDPs) in contracts with merchants, were reversed and remanded by the Second Circuit in September 2016, with instructions to enter judgment in favor of AmEx.
The petition asked: "Under the ‘rule of reason,’ did the government’s showing that AmEx’s anti-steering provisions stifled price competition on the merchant side of the credit-card platform suffice to prove anticompetitive effects and thereby shift the burden of establishing any procompetitive benefits from the provisions?"
Government stance. The Justice Department declined to participate in the appeal and has asked the Supreme Court to reject the states’ petition, arguing that the case does not satisfy the Court’s traditional certiorari standards. While the Justice Department agreed with the states that the district court’s findings established a prima facie case that the anti-steering rules unreasonably restrain trade, and that the Second Circuit had erred in holding otherwise, it nevertheless argued against the Supreme Court taking the cases. Specifically, the Justice Department argued that the decision was based almost entirely on the "two-sided" nature of the credit-card industry, and neither the Supreme Court nor any other circuit had squarely considered the application of the antitrust laws to two-sided platforms, as such. Clearly, the Supreme Court did not agree with the Justice Department’s conclusions.
Attorneys: Eric E. Murphy, State Solicitor of Ohio. Evan R. Chesler (Cravath, Swaine & Moore LLP) for American Express Company.
Companies: American Express Company
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