U.S. Second Circuit Court of Appeals finds in favor of American Express in U.S. et al. v. American Express Co. et al.

On September 26, 2016, the U.S. Second Circuit Court of Appeals ruled in favor of American Express in U.S. et al. v. American Express Co. et al. The Second Circuit reversed and remanded, with instructions to enter judgment in favor of American Express, a district court ruling that American Express’ non-discrimination provisions (NDPs) in its agreements with merchants violate antitrust laws.

The United States and 17 states had brought the lawsuit against American Express in 2010. In 2015, the United States District Court for the Eastern District of New York ruled that Amex’s NDPs violate the U.S. antitrust laws. Professors Janusz Ordover and Richard Gilbert submitted expert reports on behalf of American Express explaining why American Express’ NDPs were pro-competitive, and Professor Gilbert testified at trial.

The Second Circuit found that the lower court erred in focusing entirely on the interests of merchants, while discounting the interests of cardholders. The Court further held that the district court failed to consider “the two-sided net price accounting for the effects of the NDPs on both merchants and cardholders.” “The NDPs prevent a merchant from seeking high‐end clientele by advertising acceptance of Amex cards but then, at the critical point of sale, offering that clientele a discounted price for not using the Amex card.” “The revenue earned from merchant fees funds cardholder benefits, and cardholder benefits in turn attract cardholders. A reduction in revenue that Amex earns from merchant fees may decrease the optimal level of cardholder benefits, which in turn may reduce the intensity of competition among payment card networks on the cardholder side of the market.”

Professor Robert Willig and other antitrust scholars filed an Amicus brief urging the Second Circuit to reverse the District Court’s judgement, on these very grounds, among others.

Professors Ordover and Gilbert were retained by Peter T. Barbur, Evan R. Chesler, and Kevin J. Orsini at Cravath, Swaine & Moore LLP and Eric J. Brenner, Donald Flexner, and Philip Korologos at Boies, Schiller & Flexner LLP. Professor Ordover was supported by Bryan Keating, Guillermo Israilevich, Michael Sabor, Piyal Hyder, Benjamin Spulber, Sahdia Khan and others from our Washington, DC office. Professor Gilbert was supported by James Ratliff, Todd Bettisworth, Tully Lillis, Kelvin Huang, Nathan Hyatt and others from the Oakland office.