Lexis Nexis - Case Brief

Not a Lexis Advance subscriber? Try it out for free.

Law School Case Brief

Ohio v. Am. Express Co. - 138 S. Ct. 2274 (2018)

Rule:

For purposes of 15 U.S.C.S. § 1, restraints can be unreasonable in one of two ways. A small group of restraints are unreasonable per se because they always or almost always tend to restrict competition and decrease output. Typically only horizontal restraints qualify as unreasonable per se. Restraints that are not unreasonable per se are judged under the rule of reason, which requires courts to conduct a fact-specific assessment of market power and market structure to assess the restraint’s actual effect on competition. The goal is to distinguish between restraints with anticompetitive effect that are harmful to the consumer and restraints stimulating competition that are in the consumer’s best interest.

Facts:

Visa and MasterCard, two of the major players in the credit-card market, had significant structural advantages over respondent credit-card companies American Express Company and American Express Travel Related Services Company (collectively, Amex). Amex was competing with them by using a different business model, which focused on cardholder spending rather than cardholder lending. To encourage cardholder spending, Amex provided better rewards than the other credit-card companies. Amex continually invested in its cardholder rewards program to maintain its cardholders’ loyalty. However, in order to fund those investments, it charged merchants higher fees than its rivals. Although this business model stimulated competitive innovations in the credit-card market, it sometimes caused friction with their merchants. To avoid higher fees, merchants attempted to dissuade cardholders from using Amex cards at the point of sale—a practice known as “steering.” Amex thereafter placed anti-steering provisions in its contracts with merchants to combat this. As a response to Amex’s anti-steering provisions, the United States and several States (collectively, plaintiffs) sued Amex, claiming that its anti-steering provisions violated §1 of the Sherman Antitrust Act. The District Court agreed, finding that the credit-card market should be treated as two separate markets: one for merchants and one for cardholders. Moreover, the District Court held that Amex’s anti-steering provisions were anti-competitive because they resulted in higher merchant fees. On appeal, the Second Circuit reversed, concluding that Amex’s anti-steering provisions did not violate §1.

Issue:

Did Amex’s anti-steering provisions violate §1 of the Sherman Antitrust Act?

Answer:

No.

Conclusion:

The Court held that Amex’s anti-steering provisions did not violate §1 of the Sherman Antitrust Act. According to the Court, the federal government and states failed to show that Amex’s anti-steering provisions had anticompetitive effects. The Court noted that the company's increased merchant fees reflected increases in the value of its services and the cost of its transactions, not an ability to charge above a competitive price. Furthermore, the Court opined that the anti-steering provisions were not shown to have stifled inter-brand competition.

Access the full text case Not a Lexis Advance subscriber? Try it out for free.
Be Sure You're Prepared for Class