Particularly since Justice Breyer insisted on reading his dissent from the bench, I shouldn’t neglect today’s other 5-4 party-line decision, and antitrust case that you will be shocked to learn came out against the government:
American Express did not violate the antitrust laws by insisting in its contracts with merchants that they do nothing to encourage patrons to use other cards, the Supreme Court ruled on Monday.
The decision has implications not only for what one brief called “an astronomical number of retail transactions” but also for other kinds of markets, notably ones on the internet, in which services link consumers and businesses.
Such “two-sided platforms,” the court said, require special and seemingly more forgiving antitrust scrutiny.
The vote was 5 to 4, with the court’s more conservative members in the majority. Justice Clarence Thomas, writing for the majority, said the specialized nature of credit-card transactions justified what in other circumstances might have been anti-competitive conduct.
Retailers pay so-called swipe fees when customers use credit cards. American Express charges higher fees than Visa or Mastercard, meaning that merchants have good reason to prefer those other cards.
But credit card networks create “two-sided platforms,” Justice Thomas wrote, and they “differ from traditional markets in important ways.” Since card companies deal with both merchants and consumers, he wrote, people challenging actions as anticompetitive must take account of the effect on both sets of market participants.
Viewed that way, Justice Thomas wrote, American Express promoted competition by designing rewards programs to attract affluent customers.
“Amex’s business model sometimes causes friction with merchants,” he wrote. “To maintain the loyalty of its cardholders, Amex must continually invest in its rewards program. But, to fund those investments, Amex must charge merchants higher fees than its rivals.”
The reverse-Robin-Hood aspects of AmEx’s business model should mean that is faces less antitrust scrutiny, in other words. Very New Gilded Age logic indeed!
Breyer’s dissent is strong:
What about the academic articles the majority cites? The first thing to note is that the majority defines “two-sided transaction platforms” much more broadly than the economists do. As the economists who coined the term explain, if a “two-sided market” meant simply that a firm connects two different groups of customers via a platform, then “pretty much any market would be two-sided, since buyers and sellers need to be brought together for markets to exist and gains from trade to be realized.” The defining feature of a “two-sided market,” according to these economists, is that “the platform can affect the volume of transactions by charging more to one side of the market and reducing the price paid by the other side by an equal amount.” That requirement appears nowhere in the majority’s definition. By failing to limit its definition to platforms that economists would recognize as “two sided” in the relevant respect, the majority carves out a much broader exception to the ordinary antitrust rules than the academic articles it relies on could possibly support.
Neither the majority nor the academic articles it cites offer any explanation for why the features of a “two-sided transaction platform” justify always treating it as a single antitrust market, rather than accounting for its economic features in other ways, as the District Court did. The article that the majority repeatedly quotes as saying that “ ‘[i]n two-sided transaction markets, only one market should be defined,’” justifies that conclusion only for purposes of assessing the effects of a merger. In such a case, the article explains, “[e]veryone would probably agree that a payment card company such as American Express is either in the relevant market on both sides or on neither side . . . . The analysis of a merger between two payment card platforms should thus consider . . . both sides of the market.” In a merger case this makes sense, but is also meaningless, because, whether there is one market or two, a reviewing court will consider both sides, because it must examine the effects of the merger in each affected market and submarket.
Put all of those substantial problems with the majority’s reasoning aside, though. Even if the majority were right to say that market definition was relevant, and even if the majority were right to further say that the District Court should have defined the market in this case to include shopper-related services as well as merchant-related services, that still would not justify the majority in affirming the Court of Appeals. That is because, as the majority is forced to admit, the plaintiffs made the factual showing that the majority thinks is required.
Recall why it is that the majority says that market definition matters: because if the relevant market includes both merchant-related services and card-related services, then the plaintiffs had the burden to show that as a result of the nondiscrimination provisions, “the price of credit-card transactions”—considering both fees charged to merchants and rewards paid to cardholders—“was higher than the price one would expect to find in a competitive market.” Ante, at 16. This mirrors the Court of Appeals’ holding that the Government had to show that the “nondiscrimination provisions” had “made all [American Express] customers on both sides of the platform—i.e., both merchants and cardholders—worse off overall.”
The problem with this reasoning, aside from it being wrong, is that the majority admits that the plaintiffs did show this: they “offer[ed] evidence” that American Express “increased the percentage of the purchase price that it charges merchants . . . and that this increase was not entirely spent on cardholder rewards.” Indeed, the plaintiffs did not merely “offer evidence” of this—they persuaded the District Court, which made an unchallenged factual finding that the merchant price increases that resulted from the nondiscrimination provisions “were not wholly offset by additional rewards expenditures or otherwise passed through to cardholders, and resulted in a higher net price.”
Finally, the majority reasons that the nondiscrimination provisions “do not prevent Visa, MasterCard, or Discover from competing against [American Express] by offering lower merchant fees or promoting their broader merchant acceptance.” Ante, at 20. But again, the District Court’s factual findings were to the contrary. As I laid out above, the District Court found that the nondiscrimination provisions in fact did prevent Discover from pursuing a low-merchant-fee business model, by “den[ying] merchants the ability to express a preference for Discover or to employ any other tool by which they might steer share to Discover’s lower-priced network.” 88 F. Supp. 3d, at 214; see supra, at 7. The majority’s statements that the nondiscrimination provisions are procompetitive are directly contradicted by this and other factual findings.
* * *
For the reasons I have explained, the majority’s decision in this case is contrary to basic principles of antitrust law, and it ignores and contradicts the District Court’s detailed factual findings, which were based on an extensive trial record. I respectfully dissent.
That’s just a representative sample; Breyer very carefully lays out multiple logical errors and the numerous key factual findings Thomas’s opinion ignores.
Between this and the ugly Texas discrimination ruling, Monday is an excellent example of what one might call the inverse Carolene Products jurisprudence of the Roberts Court: the more powerful the interest, the more likely they are to get a sympathetic hearing, while discrete and insular minorities are increasingly likely to find themselves out of luck.
…via sleepyirv in comments, another contrarian Jeffrey Rosen take that’s not off to a good start.