United States v. American Express Co.

The federal government and 17 states (plaintiffs) sued Visa, Mastercard, and American Express Co. (Amex) (defendant) alleging that antisteering provisions in their merchant agreements unreasonably restrained trade and violated antitrust law. Visa and Mastercard voluntarily rescinded their antisteering provisions, but Amex proceeded to trial. Called nondiscriminatory provisions (NDPs), Amex’s terms prohibited merchants who accept Amex cards from asking customers to use other payment methods. Amex conducted a value-recapture initiative over a five-year period that raised fees charged merchants in specific market segments. Amex targeted segments with relatively high cardholder insistence—where cardholders insist on using Amex—for multiple rounds of price hikes without significant merchant attrition. The district court concluded that evidence showed Amex had enough market power to raise prices unilaterally in the network-services market, defined as the market in which the four major credit-card companies (Visa, Mastercard, Amex, and Discover) compete. The court adopted that definition from an earlier case against Visa and applied the hypothetical-monopolist test to exclude debit cards. The court did not limit the market to card providers using two-sided instead of open platforms and failed to consider the concomitant benefits for cardholders provided by increased merchant fees. The evidence did not show costs or profit margins across both sides of Amex’s platform—merchants and consumers—or that credit-card usage or quality declined during the value-recapture period. Instead, both overall usage and available cardholder perks increased across the credit-card market. The district court nonetheless found that Amex violated the Sherman Act. Amex appealed.