Ohio v. American Express Co. (16-1454)

argument 16-1454

Ohio v. American Express Co.

Supreme Court of the United States 1h 1m 5 speakers 8 chapters transcribed 5 days ago official recording ↗

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What is the government’s initial antitrust claim against American Express?

John G. Roberts 0:00

We'll hear argument next in Case 16-14-54, Ohio et al. v. American Express Company. Murphy?

Joseph H. Hunt 0:08

Mr. Chief Justice, and may it please the Court, the government met its initial burden to show anti-competitive harm in this case under the rule of reason by proving that American Express's anti-steering provisions have stifled interbrand price competition and raised the prices that all four credit card companies charge merchants for. The restraints have these horizontal effects because they bar merchants from accurately informing their retail customers about the different costs of credit cards and from offering them incentives, such as price discounts, to use cheaper cards. As a result, retail customers make decisions about which card to use in the dark about their relative costs, and merchants cannot reward credit card companies with

Joseph H. Hunt 0:54

greater market share by lowering their prices. As a result, that eliminates any incentive for credit card companies to do so. As Discover's president testified about its failed price-cutting strategy in the late 1990s, price cuts simply gave away money in the form of a lower price.

Sonia Sotomayor 1:14

We're not here to protect competitors, right, Mr. Murphy? Correct. Or necessarily even merchants. The antitrust laws are aimed at protecting consumers. You'd agree with that? Correct, although in this case... Okay, so given that, there's no evidence of restricted output in this case, correct?

Joseph H. Hunt 1:31

I would agree that it's ambiguous. There's no one way or the other about whether it has restricted output. And

Sonia Sotomayor 1:37

that's normally what the antitrust laws care about is deadweight loss. That's the primary concern of antitrust activity. Wouldn't you agree?

Joseph H. Hunt 1:45

Correct, although I think... Okay,

Sonia Sotomayor 1:46

all right, so you're left with this price question, and you have an increase in price to merchants... But do we have any evidence that consumers, at the end of the day, including the rewards aspect of what they get back, actually pay a net price increase?

Joseph H. Hunt 2:02

Absolutely. We have evidence of restrictive competition. What evidence do you have of that?

Sonia Sotomayor 2:05

No, no, no. Evidence of net price increase to consumers.

Joseph H. Hunt 2:09

Well, so we don't think that we legally have to meet that. I know

Sonia Sotomayor 2:12

you don't. I'm just asking,

Joseph H. Hunt 2:14

do you have any evidence of it? Factually, the district court— held at District Court Petition Appendix Pages 166 to 167, that the higher net prices were not offset by higher card. Well, you have

Sonia Sotomayor 2:27

proof that not all of the increased price that American Express extracts gets to the consumer. That's not my question, however. My question is, do you have any evidence that on a net basis consumers pay more? And I don't believe you have.

Joseph H. Hunt 2:43

Well, if we're just talking, first off, I think merchants are consumers in this context. I'm

Sonia Sotomayor 2:47

asking about consumers.

Joseph H. Hunt 2:48

So the cardholder consumers, I think that there is evidence that they have restricted options on that side. Isn't

Elena Kagan 2:54

that true, given American Express's tying or restriction, that no merchant can offer a consumer a five or ten or other discount for using Visa, MasterCard, or Discover, correct?

Joseph H. Hunt 3:12

Absolutely correct. It has restricted competition on that side of the market in the sense of they have less options. An Amex cardholder who would prefer to have a 1% discount if the Amex cardholder uses a Discover card, merchants aren't allowed to offer that option. So all consumers, including cardholder consumers, have less options than they would if these anti-steering rules were not in place. Essentially, Amex has channeled

Sonia Sotomayor 3:41

Isn't that true with every vertical restraint? Anytime I say I'm only going to service Cadillacs at a Cadillac dealership, I can't buy a Volvo at a Cadillac dealership. All vertical restraints have the impact of restricting interbrand competition in that respect. But we learned through painful experience and many, many years that they're generally pro-competitive, right?

Joseph H. Hunt 4:06

So it's not all interbrand restraints. So the classic manufacturer-distributor restrictions only affect interbrand competition in order to promote interbrand competition. Your hypothetical was about exclusive dealing, which I would admit affects interbrand competition.