The U.S. Supreme Court on June 25 handed down a decision in the case of Ohio v. American Express, ruling that American Express did not violate the Sherman Antitrust Act. The decision comes after a long battle that started in 2010 when the U.S. Department of Justice (DOJ), in conjunction with several state attorneys general, brought the case against Visa, Mastercard and American Express arguing that the rules promulgated by the card networks preventing merchants from offering discounts were a violation of antitrust laws.
While Visa and Mastercard chose to settle with DOJ and allow merchants to provide discounts, American Express fought the case and in the meantime prevented merchants who accepted American Express from providing discounts.
When the case was brought before the U.S. District Court for the Eastern District of New York, the court ruled that American Express violated antitrust laws. That decision, however, was overturned by the U.S. 2nd Circuit Court of Appeals when the court argued that the legal test to determine liability should take into consideration the two-sided platform the card network represents. In that decision, the court argued that American Express represented a platform with two separate interests within a single market—the consumers and the merchants. The court stated that the impact to each side of the platform must be taken into consideration when deciding whether the antitrust laws were violated.
After the decision by the court of appeals, several state attorneys general requested that the Supreme Court review the case and in such review, the court ruled 5-4 in favor of upholding the lower court’s decision. While the court ruled in favor of American Express yesterday, Justice Stephen Breyer wrote the dissenting opinion and even read part of his opinion from the bench, emphasizing his disagreement. He asserted that the court ruled inconsistently with the basic principles of antitrust law.
On a practical basis, the ruling means that American Express can continue to prevent merchants who accept their cards from discounting for other payment cards. The real question for merchants is whether the reasoning used in the Supreme Court decision will be applied toward the other card networks such as Visa and Mastercard which previously settled and allow for discounting.
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