United States: Supreme Court's Decision In Amex: Summary And Potential Implications

Last Updated: June 27 2018
Article by Michael S. McFalls, Mark Popofsky and Kennan Khatib

On June 25, the Supreme Court issued its much anticipated opinion in Ohio v. American Express Co., holding that American Express's antisteering provisions do not violate federal antitrust law (5-4, Justice Breyer dissenting, with Justices Ginsburg, Sotomayor, and Kagan joining). The case presented a number of important issues, including the analysis of competitive effects in two-sided markets and the burden-shifting framework employed in the analysis of vertical restraints. Below, we summarize the decision and provide insight into potential implications of the ruling.

The Decision

At issue in the case were American Express's ("Amex") antisteering provisions in its contracts with merchants. These provisions prohibit merchants from discouraging customers from using their Amex cards at the point of sale. According to Amex, absent these provisions, which preserve its ability to offer cardholder benefits, merchants would otherwise have an incentive to divert customers to other payment methods because Amex's merchant fees exceed those of its primary competitors, Visa, MasterCard, and Discover.

Analysis of Competitive Effects in Two-Sided Markets.

Essential to the Court's ruling was its analysis of two-sided platforms. While the District Court found anticompetitive effects when the plaintiffs proved a price increase to one side of a two-sided platform, the Second Circuit reversed and the Supreme Court affirmed, holding that in some situations, competitive effects must be analyzed on both sides of the platform. To reach this conclusion, the Court detailed the characteristics of two-sided platforms. "Two-sided platforms offer different products or services to two different groups who both depend on the platform to intermediate between them." These platforms often exhibit "indirect network effects," which exist where the value of the two-sided platform to one group of participants depends on how many members of a different group participate. A credit card, for example, is more valuable to cardholders when more merchants accept it, and is more valuable to merchants when more cardholders use it. To ensure sufficient participation, two-sided platforms must be sensitive to the prices they charge each side. The Court explained, however, that sometimes indirect network effects require two-sided platforms to charge one side much more than the other.

Ultimately, the Court held that both sides of the credit-card market must be considered in analyzing competitive effects. While the Court states that "it is not always necessary to consider both sides of a two-sided platform . . . when the impacts of indirect network effects and relative pricing in that market are minor," two-sided "transaction" platforms "exhibit more pronounced indirect network effects and interconnected pricing and demand." In a two-sided "transaction" platform, transactions affect both sides of the platform simultaneously. Credit cards are the paradigmatic transaction platform, as credit card transactions simultaneously affect users (by facilitating a purchase and accruing rewards on the user side of the platform) and merchants (by facilitating a sale and resulting merchant fees on the merchant side of the platform). Thus, the court determined that competitive effects analysis regarding Amex's steering agreements needed to take into account both interconnected sides of the platform and the collective effect of the restraint on the credit-card market, not just the merchant side of that market. In making this determination, the Court emphasized the inextricable link between merchants and cardholders and the mutual flow of indirect network effects between the two groups. The Court distinguished the relationship of merchant and cardholder in the credit-card market from reader and advertiser in the newspaper-advertisement market. In the latter, the indirect network effects operate in only one direction, because readers are largely indifferent to the amount of advertising that a newspaper contains. Accordingly, the newspaper-advertisement market "behaves much like a one-sided market and should be analyzed as such." In contrast, two-sided transaction platforms facilitate "a single, simultaneous transaction between participants . . . [and] are thus better understood as supplying only one product—transactions."

Plaintiffs Failed to Show Anticompetitive Effects in Both Sides of the Credit-Card Market.

The Court further found that the plaintiffs failed to carry their burden to prove anticompetitive effects in the relevant market. In order to demonstrate anticompetitive effects in the two-sided credit-card market as a whole, the plaintiffs had to prove that Amex's antisteering provisions either (i) increased the price of credit-card transactions above a competitive level, or (ii) otherwise stifled competition in the credit-card market.

On the first, the plaintiffs relied entirely on proving that Amex's antisteering provisions increased merchant fees; they otherwise ignored the effect these provisions had on cardholders. Ultimately, the plaintiffs failed to show that the price of credit-card transactions was higher than the price one would expect in a competitive market. Because Amex on the one hand, and Visa and MasterCard (and Discover) on the other hand, run structurally different businesses, the Court found that variations in their allocation of fees between merchants and cardholders is not evidence that Amex acted in an anticompetitive manner. The Court also noted that Visa and MasterCard's merchant fees were increasing at locations where Amex was not accepted, suggesting that rising merchant fees were not caused by Amex's antisteering provisions, but rather by increased competition for cardholders and other industry-wide trends. Lastly, the Court pointed to the dramatic 30% increase in credit-card transactions from 2008 to 2013, undermining the argument that output was reduced or supracompetitive prices were charged. When higher prices are associated with higher output, the Court reasoned, higher prices alone are not evidence of anticompetitive effects.

On the second, the Court found that interbrand competition had increased since Amex imposed its vertical restraint. With respect to competition for cardholders, Amex spurred its rivals to introduce new premium card categories with higher rewards and increase the availability of credit cards to low-income customers. With respect to merchant fees, the Court submitted that fierce competition exists. For example, when Amex raised its fees between 2005 and 2010, some merchants switched to rival networks, and when its remaining merchants complained, Amex ceased raising its fees. The Court also noted that Amex's competitors have exploited its higher merchant fees by charging lower fees and achieving broader merchant acceptance, with approximately three million more locations than Amex. Finally, the Court found that Amex's antisteering provisions are not inherently anticompetitive. Instead, they stem negative externalities, because when a merchant shows an unwillingness to accept an Amex card at one location, a cardholder may also be dissuaded from using the card at other locations.

Finding that the plaintiffs failed to satisfy the first step in the customary three-step burden-shifting rule of reason analysis, i.e., proof of anticompetitive effect, the Court held that Amex's antisteering provisions do not unreasonably restrain trade. In the course of this discussion, the Court appeared to foreclose reliance on a "quick look" method of demonstrating anticompetitive effects in a vertical case directly, seemingly to require proof of a relevant market.

Potential Implications

More Difficult to Make a Prima Facie Showing of Anticompetitive Effects in Certain Multi-Sided Markets. In two-sided transaction platforms, where one side is often benefitted at the expense of the other, plaintiffs can no longer rely on solely showing anticompetitive effects in one side, but must now functionally balance anticompetitive effects and pro-competitive benefits in their prima facie case. On the other hand, the decision makes clear that certain multi-sided platforms, such as newspapers, do not require weighing of competitive effects on all sides of the platform. The decision is likely to generate considerable debate regarding platforms that lie somewhere between multi-sided transaction platforms, where network effects are direct, and newspapers, where the link between sides of the platform is more indirect and disproportionate.

No Vertical Quick Look. The Court's ruling can be read to require defining a relevant market in all vertical cases, which also could raise the bar to plaintiffs in some settings.

Not All Two-Sided Platforms Are Created Equal. The Court's differentiation of the credit-card market from the newspaper-advertisement market provides valuable insight into how to analyze competitive effects in two-sided markets. The likelihood is that competitive effects on both sides of a two-sided platform will be considered increases as the impact of indirect network effects increases. The Court emphasized the inextricable link between merchant and cardholder, the platform for which facilitates a single, simultaneous transaction. Thus, both sides of transaction-based platforms that facilitate a common output are likely to be considered in the analysis of competitive effects. In our increasingly interconnected world, the existence of such transaction platforms is growing. Likely examples of two-sided transaction platforms include Uber (a ride), StubHub (a ticket transfer), and Amazon.com (a sale).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions