Following the Second Circuit Court's refusal
in January to reconsider American Express' September 2016 victory
against the U.S. Department of Justice, the DOJ has opted not to pursue the
case further, according to The Wall Street Journal. The attorneys general of 11
of the 17 states that were the DOJ's joint plaintiffs, however, have asked the
Supreme Court to take the antitrust case. The June 2 Supreme Court filing, provided
to BTN by the Ohio attorney general's office, represents Connecticut, Idaho,
Illinois, Iowa, Maryland, Michigan, Montana, Ohio, Rhode Island, Utah and
Vermont and is led by the attorney general of Ohio. Arizona, Missouri,
Nebraska, New Hampshire, Tennessee and Texas were plaintiffs in the case until
now but did not sign on to the filing.
In question are Amex's rules that bar merchants that accept
Amex cards from steering customers to forms of payment that cost the merchants
less per transaction. An Amex spokesperson said the card network will continue
to "vigorously defend" its case, saying the anti-steering rules
protect consumers' right to choose their form of payment. "We believe the
DOJ's decision not to proceed sends a strong signal that this seven-year
litigation should come to an end," the Amex spokesperson said.
Why the States Say
the Supreme Court Should Take the Case
In the 45-page filing, the states claim the case has
national implications. They also maintain that Amex's rules restrain trade for
cardholders and merchants; the Second Circuit had ruled that the DOJ proved
only that Amex restrains trade for merchants. Additionally, the filing said the
Second Circuit interpreted that the cost of anti-steering rules for merchants is
offset by the benefit to cardholders through rewards and services.
The states lay out a few arguments against that contention. First,
they maintain that the Second Circuit's definition of the market on trial
doesn't coincide with the Supreme Court's definition, based on previous
rulings. In 1992's Eastman Kodak Co. v.
Image Technical Services, according to the states' filing, the Supreme
Court determined that just because pricing for photocopier replacement parts
affects pricing for photocopier services and vice versa, it doesn't mean
they're one market. Now, the states petitioning the Supreme Court say Amex
cardholders and Amex merchants similarly are separate markets. Thus, say the
states, cardholder rewards cannot offset merchant costs. "Only after this
costly litigation did the Government learn from the Second Circuit that [the
court] had allegedly focused on the wrong 'market.' … Years of litigation that
were financed through taxpayer dollars were wasted," the filing stated.
The states also claim the Second Circuit applied the burden
of proof differently in the Amex case from how the Supreme Court has applied it
in its own previous cases. Based on precedent, the states maintain, the Supreme
Court would require the defendant, in this case Amex, to prove that cardholder
benefits offset merchant costs, while the lower court had charged the DOJ to prove
they do not offset.
On
top of all of that, the states say anti-steering rules prompt merchants to
raise prices for all its shoppers, while cardholder rewards benefit only
cardholders. According to the states, that means the higher prices caused by
Amex's anti-steering rules are subsidizing the rewards Amex gives to its
cardholders. The states argue: "To be procompetitive, the rewards and
services must arise from American Express' efficiencies, not from the overall
market's pricing inefficiencies. … With anti-steering provisions in place,
Amex's customers do not internalize the full cost of their payment choice [and]
instead receive a subsidy from other retail customers."