Ohio v. American Express Company

138 S.Ct. 2274 (2018)


D provides credit-card services to both merchants and cardholders. When a cardholder buys something from a merchant who accepts D credit cards, Amex D processes the transaction through its network, promptly pays the merchant, and subtracts a fee. D requires the merchant to agree to an anti-steering contractual provision that prohibits merchants from discouraging customers from using their D card after they have already entered the store and are about to buy something. By providing services to cardholders and merchants, credit-card companies bring these parties together, and therefore operate what economists call a “two-sided platform.” A two-sided platform offers different products or services to two different groups who both depend on the platform to intermediate between them. Credit card interactions are called transaction platforms. The key feature of transaction platforms is that they cannot make a sale to one side of the platform without simultaneously making a sale to the other. D competes with Visa and MasterCard by using a different business model. D earns most of its revenue from merchant fees. D’s business model focuses on cardholder spending rather than cardholder lending. To encourage cardholder spending, Amex provides better rewards than other networks. Due to its superior rewards, D tends to attract cardholders who are wealthier and spend more money. Merchants place a higher value on these cardholders, and D uses this advantage to recruit merchants. D must continually invest in its rewards program. To fund those investments, D must charge merchants higher fees than its rivals. One way that merchants try to avoid these higher fees is by dissuading cardholders from using D at the point of sale. This practice is known as “steering.” has anti-steering provisions in its contracts with merchants. Ps sued D claiming that its anti-steering provisions violate §1 of the Sherman Act. The District Court agreed. It found that the credit-card market should be treated as two separate markets-one for merchants and one for cardholders. The District Court found that D’s anti-steering provisions are anticompetitive because they result in higher merchant fees. The Court of Appeals for the Second Circuit reversed. It concluded that the credit-card market is one market, not two. It then concluded that D’s anti-steering provisions were not anticompetitive and did not violate §1. The Supreme Court granted certiorari.