March 10, 2014
On February 18, 2015, American Express lost its court battle with the Department of Justice’s Antitrust Division over the card’s Non-Discrimination Provisions (“NDPs”), which prohibited merchants from steering customers to another network’s cards. The American Express case demonstrates that two commonly-held beliefs about antitrust in America are false. First, the decision shows that the DOJ is willing and able to litigate complex rule-of-reason cases through trial. Second, like the DOJ’s other recent vertical restraints cases, this decision reminds us that vertical restraints by firms with market power are still risky and require careful antitrust analysis.

After a seven-week trial, Judge Garaufis in the United States District Court for the Eastern District of New York issued a 150-page decision siding with the Department of Justice (DOJ), ruling that American Express’s NDPs were restraints of trade in violation of Section 1 of the Sherman Act. The decision is based on a full Rule of Reason analysis of competitive effects of American Express’s anti-steering provisions. The trial spun out of the DOJ’s October 2010 suit of Visa, MasterCard and American Express challenging the cards’ NDPs. Visa and MasterCard settled, agreeing to modify their rules to permit forms of discounting at the point of sale and to allow merchants to encourage the use of other card brands, while American Express chose to defend its NDPs at trial.

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