Ohio v. American Express: The Decision [SCOTUSbrief] - YouTube

Fundamentally, the antitrust laws are about harm to competition in markets.

So, we define the market as our unit of analysis, uh, where that harm or benefit to the marketplace

might occur.

The credit card industry operates in what we call a two-sided market.

Companies like Mastercard, Visa, and American Express balance two sides in the marketplace.

One the one side, uh, stores are merchants that accept cards and allow consumers to use

them, uh, at the point of sale.

And on the other side, consumers are attracted, uh, by benefits that cardholders offer, frequent

flyer miles, uh, and other amenities.

Whereas stores, uh, are attracted by the prospect of increased sales by consumers who wish to

use that card, uh, inside the merchant's marketplace.

In two-sided markets, uh, market definition presents a fundamental difficulty.

There are more than one market or more than one group of consumers affected.

Whether antitrust law would treat two-sided or multi-sided markets differently than single-sided

markets was really what was at stake in Ohio versus American Express.

What was at the heart of this particular litigation is a contractual provision that American Express

requires merchants to agree to.

Occasionally, merchants would steer customers at the point of sale towards using Mastercard

or Visa rather than American Express so they could use lower merchant fees.

A steering arrangement, a contractual provision imposed by American Express among retailers,

prohibited merchants from doing so.

American Express' business model was: charge higher merchant fees, prohibit steering to

its competitors at the point of sale, but to use those higher fees to fund its benefits

to consumers.

Because of the steering provisions, American Express was able to increase output over time,

become a more effective competitor against Mastercard and Visa.

The tricky question in front of the Court was whether American Express' steering provisions,

that clearly resulted in slightly higher prices for merchants at the point of sale, were part

of the normal competitive process or were anti-competitive.

Justice Thomas' opinion focused on the economics of two-sided markets and how to distinguish

them from the normal single-sided markets, uh, that antitrust is normally concerned with.

Justice Thomas' opinion identified that the card networks at work here, American Express,

were transactional platforms.

And the way they competed was a little bit different than we think about the steel industry,

or the automobile industry, or supermarkets, or other markets that we commonly see at-

at issue in antitrust cases.

Here, firms compete by bringing together two sides of disparate markets that have interdependent

demand: cardholders and merchants.

A rule that harm to any group of consumers on any side of a platform would be sufficient

to declare a practice unlawful, Justice Thomas reasoned, would result in a rule in which

all sorts of pro-competitive activity would be chilled.

The antitrust laws would be doing the opposite of what they were designed to do.

In order to avoid that result, Justice Thomas and the majority set forth a relatively straightforward

rule.

And it's not a special rule for platforms.

It is bringing in line antitrust rules for platforms with traditional treatment.

Plaintiffs have the same burden,

that is, to satisfy the prima facie burden, a plaintiff must show harm to the overall

competitive process.

Justice Breyer authored the dissent and the opinion, joined by Justice Sotomayor, Kagan,

and Ginsburg.

Justice Breyer's dissent held that the appropriate way to handle multi-sided markets under Section

1 of the Sherman Act would be to allow the plaintiff to prevail wherever it could show

harm to one group of consumers.

In this case, Justice Breyer would have concluded that because merchants pay higher merchant

fees when they used the American Express network as a result of the steering fees, that would

be sufficient for the plaintiff's burden to be dispelled.

The majority decision makes clear that the antitrust framework for Section 1 that applies

to traditional markets is flexible enough to reach transactional platforms, credit card

networks and ridesharing apps being two particularly good examples.

The decision leaves open whether that same approach will be applied to non-transactional

platforms that have the advertisers on one side and users on another, and are missing

that component where each side can be held together through a common transaction that

remains to be seen likely in future litigation.