Ohio v. American Express Co.
Headline: Court upholds a major credit-card company’s ban on merchants discouraging its card use, allowing card networks to keep higher merchant fees and fund cardholder rewards without antitrust liability.
Holding: The Court held that the card company’s antisteering contract terms do not violate federal antitrust law because the plaintiffs failed to prove those terms harmed competition in the two-sided credit-card transaction market.
- Allows card companies to keep antisteering clauses in merchant contracts.
- Permits card networks to maintain higher merchant fees to fund cardholder rewards.
- Requires antitrust plaintiffs to prove harm to the whole two-sided transaction market.
Summary
Background
The United States and several States sued a major credit-card company, arguing that its contracts with merchants forbid those merchants from discouraging customers from using that company’s card at the point of sale. Merchants had complained because that card charged higher fees. A federal trial court found the contract terms unlawful under federal antitrust law, but the appeals court reversed, and the case reached the Supreme Court.
Reasoning
The Court explained that credit-card services operate as a single, two-sided transaction market that links merchants and cardholders together. The Justices said courts must analyze both sides of that market when judging antitrust effects. Applying that approach, the majority concluded the plaintiffs did not prove the contracts produced anticompetitive results in the two-sided market: there was no reliable proof transactions cost more than a competitive level, transaction volume actually rose, and competition and service quality expanded while the provisions were in place.
Real world impact
Because the Court ruled the contract terms do not violate antitrust law, card networks can keep similar antisteering clauses and continue using merchant fees to support customer rewards programs without automatic liability. The ruling also raises the bar for antitrust challengers: they must show harm to the whole two-sided transaction market, not just changes on the merchant side.
Dissents or concurrances
A dissenting opinion, written by Justice Breyer and joined by three other Justices, argued the trial court’s factual findings showed the provisions harmed competition and that invalidating them was a proper way to restore price competition for merchants.
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