Ohio V. American Express: Do Monopoly Platforms Deserve Special Treatment Under Antitrust?

[Commentary] The Supreme Court heard oral arguments in a pivotal antitrust case involving American Express (“AmEx”). The decision could have a profound impact on the way platform-based companies such as Google and AmEx will be treated under the law. Some of the Court's questioning was truly impressive, showing knowledge of both economics and the inner workings of credit card markets. Other questions? Not so much. Before pointing out the uneconomic utterances, let’s quickly review the case. Credit card companies make money two ways. Card users pay them subscription fees (sometimes) and interest payments. Businesses that accept the cards (“merchants”) also pay credit card companies a fee for processing of the credit transactions. This double-sided business model is termed a “two-sided market” or “two-sided platform.” It isn’t new. Newspapers have been selling subscriptions and ads in a two-sided market for more than a century. What is kind of new is that the internet has made creating these two-sided platforms increasingly common (and easy) by providing places for sellers to find buyers and extracting value from both. Think Uber or Amazon or Google. A district court found AmEx liable for violating antitrust laws because AmEx imposed anti-steering restrictions on merchants; the court held the restrictions harmed competition. Anti-steering restrictions prevent a merchant from inducing — indeed, even telling — a customer to use a "less expensive" credit card in exchange for a discount on the purchase. AmEx appealed that district court's finding to the Second Circuit Court of Appeals, which determined (incorrectly in my view) that it was not sufficient for plaintiffs (the State of Ohio, suing on behalf of its citizens, including citizen merchants) to show antitrust injury to merchants attributable to the anti-steering provisions. Rather, the Second Circuit ruled that plaintiffs have an additionalevidentiary burden to show antitrust injury to cardholders as well — that is, the other revenue stream on the same transaction. The implications of such a special rule for platforms would be profound.

[Hal Singer is a principal at Economists Incorporated, an adjunct professor at Georgetown University’s McDonough School of Business, and a senior fellow at George Washington's Institute of Public Policy.]