DOJ Turns Away From Supreme Review Of Amex Merchant Deals

In what seems to be an 180-degree turn, the Department of Justice (DOJ) is asking the Supreme Court not to weigh in on American Express’ (Amex) merchant contracts and “steering” activity.

News from Bloomberg stated that the DOJ made its decision not to appeal a decision from the U.S. Court of Appeals for the Second Circuit. That court ruled that the DOJ should have looked at how Amex’s practices impacted both sides of the two-sided market traditionally made up of merchants and consumers.

In a brief filed earlier this week by the acting solicitor general that made the argument against a Supreme Court review, the DOJ gave at least some rationale behind the decision not to appeal.

Even though the DOJ is arguing against the antitrust scrutiny by the high court, 11 states under the leadership of the Ohio attorney general are carrying on with their own appeal over the ruling that let Amex stop merchants from “steering” to cards with lower pricing in place.

One issue, according to the DOJ brief, is that, as Bloomberg noted, “the key legal question” needs to be examined by lower courts. The Supreme Court and circuit courts have yet to “squarely” consider applications of antitrust laws to those aforementioned markets. The brief posited that the appeals court “seriously departed from sound antitrust principles, and its decision leaves in place restraints that thwart price competition in an important sector of the economy and inflate the retail prices paid by all consumers … consistent with its usual practice of awaiting further percolation in the lower courts before taking up such novel legal issues; the court should deny review here.”

In reference to the two-sided markets question, there are two cases dealing with anti-steering rules that are winding their way through the legal system that would give a greater level of examination as recommended by the DOJ.

In one case, the DOJ is plaintiff against a health care system in Charlotte, North Carolina, with an eye on anti-steering rules that the Department maintains hurts competition. In another case, two-sided markets will get a look when the Second Circuit examines a $15 million verdict awarded to American Airlines in a case against Sabre. The case hinged on Sabre allegedly inflating fees. The Sabre position is that the markets are two-sided because incentives are paid to travel agents, and fees are levied on airlines to cover the cost of those incentives. Bloomberg noted that Sabre has used the Amex ruling in its position that “no reasonable jury” would see the market as one-sided.