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June 25, 2018

Supreme Court Decides Ohio v. American Express

On June 25, 2018, the United States Supreme Court decided Ohio v. American Express, No. 16-1454, holding that American Express’s antisteering rules, which prevent merchants from discouraging customers’ use of Amex cards to avoid Amex’s merchant fees, do not violate federal antitrust laws under the rule of reason.

Unlike Visa and Mastercard, which earn half of their revenue from interest paid by cardholders, Amex makes most of its money from fees charged to merchants who accept Amex cards. To prevent merchants from dissuading Amex use at the point of sale, Amex includes “antisteering” provisions in its merchant contracts.

The United States and several States sued Amex, claiming the antisteering provisions violated the Sherman Act, 15 U.S.C. § 1. The district court agreed after a trial, holding that the anti-steering provisions are anticompetitive because they result in higher merchant fees. The Second Circuit reversed.

The Supreme Court affirmed the Second Circuit’s decision, holding that the antisteering provisions are not anticompetitive. The Court reasoned that the plaintiffs had failed to meet their initial burden of proving that the provisions, which are vertical rather than horizontal restraints on the market, had a substantial anticompetitive effect that harms the relevant market. In so doing, the Court agreed with the Second Circuit that both sides of the credit-card market must be examined—the cardholder side, as well as the merchant side—not just the merchant side.

When examined as a whole, the plaintiffs failed to establish that the antisteering provisions “increased the cost of credit-card transactions above a competitive level, reduced the number of credit-card transactions, or otherwise stifled competition in the credit-card market.” The fact that Amex allocates prices differently between merchants and cardholders than Mastercard and Visa is not evidence that its fees are anticompetitive. Visa and Mastercard’s fees have also increased, even where Amex is not accepted. In addition, credit-card transactions have increased in the past decade, and increased fees are consistent with that increased demand. And, there was no evidence that competition has been stifled, as Visa and Mastercard have introduced premium cards, and credit cards have become available to a greater segment of the population. Finally, there is nothing inherently anticompetitive about the antisteering provisions.

Justice Thomas delivered the opinion of the Court, in which Chief Justice Roberts and Justices Kennedy, Alito, and Gorsuch joined. Justice Breyer filed a dissenting opinion, in which Justices Ginsburg, Sotomayor, and Kagan joined.

Download Opinion of the Court.

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