The Supreme Court Hears Oral Argument in American Express Case Raising Fundamental Questions Over Application of the Rule of Reason Test in Antitrust Cases
On February 26, 2018, the U.S. Supreme Court heard oral arguments in Ohio v. American Express Co. to decide if Amex’s anti-steering provisions in its merchant agreements constitute an unlawful vertical restraint in violation of Section 1 of the Sherman Act. Specifically, the Court explored the application of well-known antitrust standards under the “Rule of Reason”—such as how to define the relevant product market, how to apply the Rule of Reason’s burden-shifting framework, and the role of market power—in the context of a two-sided market (such as a credit card network). Two-sided markets are platforms that have two distinct user groups that provide each other with “network” benefits. That is, the addition of new users on one side of the platform benefits users on the other side of the platform. Thus, the success of the platform depends upon attracting sufficient supply and demand from both sides of the platform. Here, in the case of payment cards, the American Express Network depends on successfully incenting both the use of Amex cards by cardholders and acceptance of Amex cards by merchants. The Court appears poised to use this rare opportunity to modify the application of the Rule of Reason under the Sherman Act.