American Express v. Visa/MasterCard

Compass Lexecon was retained by David Boies, Don Flexner, Bob Silver, Damien Marshall, Cynthia Christian, and Alanna Rutherford of Boies, Schiller & Flexner LLP to conduct analyses and provide testimony regarding liability and damages in American Express’ suit against Visa, MasterCard, and their member banks. The complaint alleged that the defendants agreed to operate under anticompetitive rules that effectively prohibited member banks from issuing credit cards over the American Express network. Compass Lexecon’s client, American Express, recently settled with the defendants for more than $4 billion – the largest antitrust settlement in U.S. history.

To undertake the assignment given by American Express and its counsel, Compass Lexecon assembled four teams of experts and staff:

The ability of the client and outside counsel to rely on a single firm to provide the necessary staff support and experts as part of this major litigation matter ensured that there was maximum coordination among staff and efficient integration of expert testimony which helped to produce the historic final settlement.

• A Compass Lexecon team, led by Lisa Landes, Hal Sider, Allan Shampine and Tom Stemwedel in our Chicago office, supported Northwestern University Professor and Compass Lexecon affiliate Morton Kamien in producing a model of damages suffered by American Express as a result of the defendants’ anticompetitive conduct. Specifically, Professor Kamien and his team developed and testified about the share of credit card spending that bank-issued American Express cards would have achieved but-for the anticompetitive conduct, as well as the lift in spending that American Express proprietary charge cards would have gained from associated network effects. This information, combined with a detailed analysis of profit margins, was used to determine damages to American Express in the form of lost-profits on both its bank-issued credit cards and its proprietary charge cards.
• Compass Lexecon’s Robert Willig, working with Hal Sider, Mark Israel, and Jay Ezrielev in our Chicago and Washington, DC offices, quantified the extent of network effects in the credit card industry. The econometric analysis indicated that increases in American Express’ share of eligible consumer expenditures gained through bank issuance of American Express cards would have resulted in increases in merchant acceptance of American Express cards, which in turn would have significantly increased spending by American Express’ proprietary cardholders. State-of-the-art econometric methods applied to the data available to Dr. Willig and his team enabled Dr. Willig to present testimony that measured the size of the network effects associated with credit cards.
• Another Compass Lexecon team, led by Hal Sider, Lynette Neumann, and Eugene Orlov in our Chicago office, supported Greg Allenby, Professor of Marketing and Statistics at Ohio State University and a leading expert on the use of statistical methods in marketing. Professor Allenby rebutted claims made by Visa and MasterCard experts that bank issuance of American Express cards would have reduced the number of cards issued through American Express’ traditional marketing channels. Professor Allenby and his team demonstrated that these claims were based on a misapplication of highly sophisticated hierarchical Bayesian statistical estimation techniques.
• A fourth Compass Lexecon team, led by Susan Manning, Joanna Tsai and Jeff Rudnicki of our Washington, DC office, provided supporting analysis for the theory of anticompetitive foreclosure resulting from the exclusionary rules and other policies, such as dedication agreements between Visa and MasterCard, respectively, and their member banks.