Did you know American Express generally charges merchants higher transaction fees than Visa or MasterCard? Meaning, the store where you get your morning coffee makes a few cents less per cup if you use an Amex card. Did you also know Amex has a provision in its merchant contracts telling the merchants they can’t directly or indirectly suggest to consumers that they pay with a card other than Amex? So, although, your local coffee shop probably prefers you pay with another card (and possibly could charge you less for doing that), they are barred by contract from telling you.
Now, the Supreme Court is poised to decide whether these so-called anti-steering clauses violate antitrust rules. The case was originally filed by the Department of Justice and several states. The plaintiffs won at the district court, with a federal judge finding the anti-steering provisions were anti-competitive because they forced the merchants to pay higher fees. The Second Circuit reversed that decision, though, ruling the judge did not take into account the market structure (the credit card market involves two separate tiers—merchants and consumers) and the fact the charges were passed on to consumers.
The states requested review of the Second Circuit decision by the Supreme Court, while the DOJ (now lead by the Trump administration) reversed course and filed a brief with the Supreme Court arguing they should not take the case, and then later reversed that position again and agreed to support the states. On the other side is American Express.
The case has received a lot of attention from people in the antitrust field because the application of antitrust laws to real-world situations is notoriously complex, and there is fairly little clear guidance from the Supreme Court. As such, there were numerous amicus briefs (briefs filed by people or organizations who have an interest in the outcome of the case but who are not party to it) filed on behalf of both sides. Additionally, many businesses use contract clauses similar to the anti-steering clauses challenged in this case to obtain some level of security.
Regardless of the outcome, a case where the high court will apply the “rule of reason” analysis and reach a decision on the merits is a noteworthy event. And, depending on how broadly the court frames its opinion, the result could have substantial rippling effects over other areas of antitrust practice.
As of the date of this post, the case is fully briefed and argued, and an opinion will likely be issued in October.
By Jeremy K. Robinson, Partner
